According to the statistics of Shi Ying Group Research Center, the transaction volume of commercial projects owned by national developers that cannot generate rent or sales revenue has reached 250 million square meters, the highest level in history. According to the data of the National Bureau of Statistics, among the non-residential commercial houses in the first ten months of 20 15, the construction area (including office buildings, commercial houses and others) completed by development enterprises reached 250 million square meters, an increase of 25. 1% over the same period of 20 14, and a year-on-year increase of 20 10. Although there is still a certain gap compared with the residential market area of nearly 440 million square meters, the more expensive development cost of commercial real estate means that more funds are needed. Generally speaking, the average land price of commercial projects is about 20% or more higher than that of residential projects, and their average construction price is about 50% or even 1 times higher than that of residential projects. High inventory brings greater financial pressure to commercial real estate developers than the traditional residential market.

The importance of supply-side reform to commercial real estate

The current inventory pressure dilemma of commercial real estate in China is largely due to the imbalance between supply and demand caused by rapid urbanization in the past 30 years. Due to the excessive dependence of local governments on land finance, extensive land development is accompanied by urban construction, and a large number of commercial projects are rushing headlong. Shi Ying Group Research Center found that, especially during 2008-20 14, the development investment of office buildings and commercial buildings increased by 383% and 328% respectively, which was significantly higher than the 187% of residential development investment. Although in the early days, the market stock was generally insufficient to meet the market demand, the profit model of commercial real estate development first and then sales can achieve certain success. However, with the increasing accumulation of stocks and the increasing imbalance between supply and demand, this development model is getting weaker and weaker, and the holding business model is struggling under the impact of high financing costs and e-commerce.

In the past, when the supply and demand of real estate were unbalanced, the central government often directly stimulated demand by introducing favorable policies to save the market.

Mr. He Cheng, executive director of Shi Ying Group and founding partner of Shi Ying Venture Capital Fund, believes that with the proposal of "supply-side reform", it is not difficult to see that the central government is trying to effectively supervise the real estate in advance from the perspective of supply, which means that the government's regulation of the "tangible hand" will leave more stages to the "invisible hand" of the market. Under the trend of supply-side reform, the inventory of commercial real estate needs to be automatically adjusted and cleared through the market at present, and developers need to innovate business operation mode as soon as possible.

Light asset model and supply-side reform

According to the data of Shi Ying Group Research Center, in the first half of 20 15, the stock of commercial properties in 20 major cities in China has exceeded 97 million square meters. By 20 18, it is estimated that there will still be 61460,000 square meters of visible new supply entering the market one after another, accounting for 63% of the existing stock. This means that in three years, the stock competition and future supply pressure of commercial real estate market in most cities of China will continue to rise.

Ms. Zhang Ping, the general manager of Shi Ying Group Research Center and the chairman of the China Commercial Real Estate Professional Committee of the Royal Institute of Chartered Surveyors (RICS), believes that the commercial real estate in China has precipitated huge property assets that are being operated or developed, and the traditional investment leverage has been inefficient. Many developers are actively exploring and seeking to realize asset-light strategy. The supply-side reform proposed by the central government is helpful to improve the utilization rate of land resources, and the light asset model of operating output will improve the development level of the whole commercial real estate.