There is this article on the China Commercial Real Estate Planning website, so I’ll take the trouble to paste it for you: The real estate industry has reached an inflection point, and in the future, the existing housing market will replace the incremental market and become the main market player.

For the vast existing housing market, community operations will break the traditional asset-heavy development model of real estate companies such as financing, land acquisition, housing construction, and sales, and achieve asset-light operations.

Real estate companies that still rely on land resources for survival may encounter difficulties. In the future, the refined and professional agent construction plus fund model in the real estate industry will replace the traditional fast turnover model and become the mainstream of the industry.

Text: What is the asset-heavy model of the real estate industry? When the appreciation rate of land is higher than the cost of capital, all real estate companies will seek to reserve more land at this time. This is also rational. At this time, as long as you hold the asset itself, you can get rich

Return.

The amount of land reserves has also become the most important criterion for measuring the value of real estate companies, and sometimes it is also the only criterion.

This is the asset-heavy model of the real estate industry.

But when the appreciation rate of land slows down, the value contribution of the land reserve itself is weakening, and excessive reserves may even cause new negative value contributions. That is to say, when the appreciation rate of land or housing is lower than the cost of capital,

At this time, holding assets becomes a negative value contribution.

Therefore, in the long term, companies are forced to adjust their strategies from a heavy-asset model to a light-asset model, that is, from earning income from asset appreciation to earning income from value-added services.

The value-added service income mentioned here includes OEM brand premium income, property management, commercial operations, other derivative income, and commission income from fees in the process of diversified real estate financial services such as real estate funds.

In this transformation process, the capital released from heavy assets will be reallocated to the operating environment instead of the land reserve link. The more efficient the enterprise, the more obvious its advantages will be in the transformation process.

We say that asset-heavy and asset-light are not absolute; they are choices made by enterprises under different market environments.

When housing prices rise rapidly and asset appreciation far exceeds capital costs, the asset-heavy model with asset holding as the core is a rational choice for enterprises.

But when the rate of increase in house prices is suppressed and the return on holding assets itself decreases and is not enough to cover the capital cost during the holding period, the asset-light model is a rational choice for enterprises.

Of course, we say that this transformation does not happen instantaneously, because urbanization or the appreciation of the RMB will still promote an increase in asset returns for a period of time, but in the long term, land dividends and excess returns on assets are declining, and companies are facing transformation pressure.

Under the asset-light model, many traditional advantages of real estate companies, such as the advantage of acquiring land, will be diluted. They are still important, but not as important as before.

The efficiency advantage will be amplified, so not all companies can achieve asset-light transformation. Only companies with real efficiency advantages can achieve successful transformation.

We say that this efficiency advantage can be a unique advantage in a certain link such as development, property management, investment operations, etc., or it can be a unique advantage in a certain product segment such as commercial real estate, industrial real estate, and senior housing real estate.

A unique advantage can also be some kind of comprehensive resource integration ability.

Regardless of the advantage, in the asset-light era, capital resources and efficiency resources are more closely integrated, some companies will be enlarged, and some companies will be eliminated.

The asset-light strategy involves business model innovation and financial model innovation.

Business model, the simplest representative of the asset-light strategy is the foundry model.

The OEM model has developed rapidly in Japan in recent years, mainly due to the downward trend in land asset prices in Japan in the 1990s. Companies hoarding large-scale land have to write off asset impairment losses every year, so a large number of companies have entered the OEM market.

For example, Sekisui Real Estate, one of Japan's largest real estate companies, launched the factory-based production of modular steel structure housing for the first time in Japan in 1970. In 1987, it launched modular wood structure housing, which is the industrialized real estate model.

80% of the construction process in Sekisui can be completed in the factory. It only takes 6 or 7 minutes for the factory to produce house components.

On-site piling only takes 3 months.

Although the profit margin is not very high, with an operating profit margin of only about 10%, the company's average return on total assets has reached 40% in the past ten years due to high turnover. If financial leverage is taken into account, the return on net assets will be even higher.

The traditional development sales turnover rate is only 0.6 or 0.7 times.

The rate of return is less than 10%.

In addition to Japan, the OEM model is also widely used in various types of properties in the European and American markets. Passing the OEM threshold is not the technical advantage of industrial production, but also includes management advantages, professional industry management experience, and resource integration capabilities.

For example, Boston Properties is the largest listed office REIT in the United States. When the rental return is not enough to cover the capital costs, the company turns to the fixed development market and applies its capabilities in developing and managing Class A office buildings in the CBD area to office buildings for government agencies and scientific research institutions.

For example, from 1989 to 1996, interest rates in the United States were generally at double-digit levels, and rental returns were insufficient to cover capital costs. At this time, Boston Real Estate completed office buildings for NASA, the Federal Monetary Administration, the United States Postal Service, and the Healthcare Finance Agency.

Development and management.