Tricor & APREA co-released 'New Economy Real Estate in China – Market Review & Operational Guide 2023'

2023 has brought about the implementation of favorable political and economic policies along with the revitalization of domestic demand and investment. As such, Greater China, the largest emerging market, is set to experience a significant rebound. The new economy real estate industry presents burgeoning growth potential.

Jointly released by Tricor and Asia Pacific Real Assets Association (APREA), 'New Economy Real Estate in China – Market Review & Operational Guide 2023' offers a thorough analysis of China's new economy real estate industry, with specific emphasis on the logistics real estate market. It provides insights into the current market landscape, growth trajectory, and anticipates future trends.

What’s in this report?

This comprehensive report is structured into three chapters, providing an overview of China's new economy real estate industry, exploring its investment and financing models, and examining middle- and back-office operational practices.

1. Robust Recovery of the New Economy Real Estate Industry

Benefiting from the resilience and vitality of China's domestic market, the new economy real estate industry is set to experience a robust recovery. This growth will be fueled by the continuous expansion of third-party logistics and e-commerce sectors, along with the solid foundation of traditional industries. As the industry moves forward, it is expected to embrace a systematic, large-scale, and intelligent development approach. However, it should be noted that this progress will also present a more complex market landscape with diverse challenges.

2. Influx of Institutional Investors Seeking Stable Returns

The new economy real estate sector is expected to attract a greater influx of institutional investors seeking stable returns. This trend will spur investments in smart parks, digital economy, and AI-related fields. Long-term capital sources such as national sovereign funds, pension funds, and insurance funds will increasingly allocate resources towards new economy real estate, thereby fostering its growth.

3. New Opportunities for Private Real Estate Investment

The real estate fund policy is anticipated to create new opportunities for private real estate investment, resulting in heightened activity in establishing funds and raising capital with a focus on the "new economy real estate" theme. However, changes in the industry landscape are likely to introduce increased complexity and diversity in investment transactions.

4. Growing Focus on Optimizing Operational Efficiency

With the rapid expansion of the new economy real estate industry, flourishing business activities, and a surge in sustainable investments, there will be a growing focus on optimizing operational efficiency. This implies that companies must handle daily tasks effectively, control operating costs, and improve project management capabilities to successfully meet these demands.

5. Significance of Equity Financing

In the new economy real estate sector, equity financing, particularly through fund establishment, holds a significant position. The rapid expansion of the private equity fund industry in recent years has brought about increased regulatory scrutiny and more stringent information disclosure obligations. This has led to a growing need for professional services encompassing industry regulations, compliance reporting, and management reporting.

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As the global industrial chain integrates at an accelerated pace, China’s new economy real estate industry, with its significant market demand, relatively high return on investment, and the transformation of traditional real estate, is poised to attract global investors. With the deepening of domestic real estate private equity funds and the expansion of REITs in China, the dominance of foreign capital may gradually change, and increasingly diverse domestic investors will emerge as very prominent players.

2023 has brought about the implementation of favorable political and economic policies along with the revitalization of domestic demand and investment. As such, Greater China, the largest emerging market, is set to experience a significant rebound. The new economy real estate industry presents burgeoning growth potential.

Kim Jenkins

CEO, Tricor Group

Quote---Hailiang-Zhang-(03Oct21)---Square

There is a growing demand for new economy real estate in China driven by urbanization, the proliferation of e-commerce, digital transformation, and the thriving technology sector. This demand encompasses various sectors, including logistics real estate, data centers, industrial parks, and urban redevelopment. China’s new economy real estate has experienced significant growth in recent years and attracted new players in the market.

According to a 2022 ranking of private real estate developers in the Asia Pacific region by PERE, a private real estate research agency, more than half of the top 20 private equity developers have invested in logistics real estate in China. Foreign professional logistics real estate companies that entered the Chinese market early and established a strong presence in key regions still maintain an advantage in terms of competition, industry hierarchy, and distribution reach. The new economy real estate sector is characterized by its complex structure and diverse entities, which highlight the importance of efficient middle- and back-office operations to facilitate business expansion. Optimizing operational efficiency has become crucial for the development of enterprises operating in this sector.

Hailiang Zhang

CEO, Tricor Greater China

China’s economic structural transformation and the rapid growth of new economy enterprises have given rise to flourishing new consumption, new industries, and new technologies. As a result, the corresponding new economy infrastructure projects have undergone remarkable growth and development. Notably, the new economy real estate industry stands out with its extensive project portfolio, substantial investments, and wide geographical reach. With the continuous expansion of the industry, ESG practices have gained increasing prominence. This shift has underscored the significance of low-carbon operations and cost reduction.

Consequently, there has been a growing demand for corporate compliance and operational efficiency. As a service-oriented infrastructure platform of the new economy in China, DNE Group has made compliance management the cornerstone of our development strategy. Tricor has been an invaluable business partner in this endeavour, offering us comprehensive operational support. With their professional team boasting extensive on-the ground experience, standardized processes, and automated tools, our compliance management capabilities and operational efficiency have been significantly enhanced.

Norah Lu

Chief Financial Officer, DNE

In recent years, the new economy real estate sector has experienced remarkable growth. Our recent survey of industry practitioner reveals that both domestic and foreign institutional investors, real estate funds, and asset management companies have expressed long-term confidence in China’s new economy real estate. This confidence is evident through their sustained investments and expansions within the sector. Among these, logistics real estate has garnered significant market recognition. As public REITs continue to deepen their presence, and with the official launch of the private equity real estate funds pilot program, we anticipate a greater influx of long-term capital into the market. Furthermore, REITs have the potential to go public, enabling them to access capital market premiums and drive the transformation and advancement of the new economy real estate industry.

This report presents comprehensive data and case studies, drawing on the first-hand insights of the Asia Pacific Real Assets Association and Tricor’s extensive operational experience in serving private real estate. It aims to illustrate the market trends, investment, and financing models, as well as the operational dynamics of the middle- and back-office functions. We hope that this report will prove valuable to our readers.

Sigrid Zialcita

CEO, APREA