In a recent interview at the Sixth International Forum on Housing Leasing Industry, Dr. Qin Hong, director of the Urban Renewal Research Center at Renmin University of China, highlighted that the core of a new model for real estate development lies in the industry’s adaptation to the shift from “incremental development and sales” to “stock renewal and operation.” This new development stage emphasizes the importance of revitalizing existing assets efficiently while reducing reliance on new land.
Dr. Qin explained that traditionally, policies related to land, housing, and finance, as well as business models, have focused on incremental development and sales. Transitioning to a new model for real estate development necessitates the establishment of new institutional arrangements centered around stock renewal and operation.
One significant aspect of this new approach is rental housing, which is seen as a key component in the future of housing development and revitalizing existing stocks. Dr. Qin stated that establishing a dual-track housing system that includes both renting and purchasing is essential for managing existing stock effectively.
Zhao Ran, director of the ICCRA Housing Leasing Industry Research Institute, echoed this sentiment by emphasizing that rental housing is a crucial direction for revitalizing existing assets, as evidenced by the increasing volume of long-term rental apartment transactions and the strong performance of affordable rental housing REITs.
At the forum, attendees discussed the implications of recent government announcements, including an increase in the credit scale for “white list” projects to 4 trillion yuan and the initiation of 1 million urban village renovations and upgrades. These measures are expected to significantly impact the housing rental industry.
A report released by the ICCRA Housing Leasing Industry Research Institute titled “Value Discovery in the Housing Rental Sector Against the Background of Stock Revitalization” pointed out that as the collection of existing housing and the rapid advancement of urban village transformations continue, the rental market is poised to reshape its supply and demand structures.
The report suggests that a new wave of “dark horse” brands could emerge in the market, rapidly expanding their management scales by acquiring existing housing stock. However, some regions might face a mismatch between the demand for affordable housing and the supply of existing properties. The diversification of sources and types of existing assets will complicate their selection and renovation, exacerbating the challenges of operating on thin margins in the industry.
In response to these challenges, Zhao highlighted the need for collaborative operations across different functional sectors within the industry chain. He stressed that asset holders should approach revitalization strategically, considering the entire process from investment and financing to construction, management, and eventual exit.
As a case in point, the upcoming completion of the second phase of the Nanzhongzhou International Cultural and Technology Park in Beijing’s Dahongmen area in September 2024 exemplifies this transition. The development will feature nearly 100,000 square meters of industrial space, 30,000 square meters of service facilities, and approximately 500 talent apartments, showcasing the shift from “incremental development and sales” to “stock renewal and operation.”
Dr. Qin emphasized that revitalizing existing assets is an essential step in the urban renewal process, marking a departure from the past model of large-scale demolition and construction. The focus on revitalization underscores the importance of enhancing existing stock.
Additionally, Professor Tang Yan, from the Department of Urban Planning at Tsinghua University, pointed out that future stock revitalization efforts in cities must particularly consider three key dimensions: “balance between housing and work, accessibility of transportation, and convenience of living.” Addressing these aspects is not only a strategic measure for effectively managing existing assets but also a vital means to enhance urban livability and promote sustainable development.
