What is the Smart Corporate Real Estate Play in China?

If there’s one thing that’s true about China, it’s probably that it’s about to change. China, led by a communist regime, has one of the largest and fastest growing economies in the world.

A new CoreNet Global whitepaper, Corporate Real Estate Strategies Shift in Maturing Marketplace, explores the most up to date strategies for corporate real estate executives who want to establish and/or grow their companies’ presence in China.

The first for many is to put the brakes on the extremely rapid growth rates that had been the norm in China.

China continues to be a key location and administrative center for many advanced manufacturers operating in Asia Pacific. However, there has been a shift from a high-growth stage to a greater emphasis on maintaining and managing the existing real estate portfolio. The new stage for many veteran multinational companies in China is focused on how to better utilize the existing footprint and to manage the overall operating costs, according to the paper.

And one of those rising operating costs is labor, which has traditionally served as a great economic advantage in China. Rising cost of living and housing costs, especially in major cities, is putting pressure on labor costs with five to seven percent increases in annual pay raises, said Shaun Brodie, a senior director and head of occupier research, Greater China at Cushman & Wakefield.

So the second major strategy is to utilize space better through enhanced workplace strategies, a concept that is taking root now in China. The traditional office concept of one person and one desk is changing to the more modern workplace design that reflects the increased mobility and also the increased collaboration.

And the third lesson in the paper is that when the government in China wants to do something, it goes all out. So multinationals would be smart to pay attention to government initiatives designed to facilitate economic growth.

“Once the government wants to do something, they invest a lot of money and a lot of infrastructure will be there,” said Jackson Lee, MCR, assistant vice president at Ascendas-Singbridge in Shanghai. “Both national and MNC companies keep a close eye on government initiatives, because they can steer growth towards certain types of industries and specific geographic areas, which can help to identify future customers and growth markets,” he said.