The Future of Commercial Real Estate--Commercial Real Estate

2016-1-14

2016-01-14

Yesterday, I get information from kinds of channels, domestic investment and capital have been invested into manufacturing. Both information technology and industry incubators have sprung up from every corner of the world.

There is never an end of exploration of our development, people who has much experiences will summary and reflect themselves and understand a truth: no industry can be managed well without dedicative work. Now we cannot earn quick money any more, only when those people who know how to manage their career carefully gain a harvest in the end, when the society become more and more real, more and more fair, it can be called as maturity. And only at that time, Chinese economic development, people’s thoughts and the elites’ vision will become more mature.

Commercial real estate itself is not guilty, the sin is ambition and more profits behind the commercial real estate. The ups and downs may make many problems behind commercial real estate be exposed. Although the truth is incredible, you will not feel scared about the crisis after you know the truth about it. 

Fundamental measurement of commercial real estate: average return on real estate prices investment every year (Generally 8 - 10 years) is slightly smaller than the total annual rent of all potential sustainable tenants. The person who break the balance and even ask more, he will become the opportunist. It not represent these opportunist will immediately pay the price for their speculation (not investment) behavior, but one day they will pay for their own behavior.

And internationally generally accepted 2-3%, and during the double-digit period of GDP domestic reporting rate has risen to 8% or even higher. These can be defined as reasonable medium-term and long-term forecast report rate. This proportion is to refer the middle deposit interest rates and take the international exchange rate and the stability of the currency into consideration, unless investors will not introduce foreign capital or do overseas investments in a medium-term and long-term.

Of course, the most reasonable measure should be based on some comprehensive factors, such as: China’s control ability to RMB currency, the comprehensive national strength, economic structure and population. But in terms of the situation, even if the domestic commercial real estate does not consider the international currency, there is no big problem to do medium-term and long-term measure.

So, more accurate measures of potential tenants’ revenue ability have become the most urgent task to measure  the payment ability of managers entered in and sustainable management. 

Here is an inescapable question we should know: retail, we should know the retail enterprises more than themselves. At least we should know over 80% potential tenants’ turn over, estimated data should be more accurate and more close to the real data than that of their internal expansion team, than their boss who made the final decision by knocking the head, then, your test data will have 80% correct rate.

In another word, we should know the operation of retail manufacturing to do commercial real estate. We should know how to calculate the turnover of entity retail store by limited data, property condition. The only uncontrollable factor is man-made, such as the manager experience, product adjustment, etc. So, this method is suitable for standardized management of chain stores. The more international it is, the more accurate the measure is.

Another big problem is about large quantity, wide range of non-standard stores, stores, joining stores, individual stores, and so on. How to measure these stores which have been influenced by investors’ personal factors? And if we can solve this problem, more than 80% of the local commercial real estates in China will find their own development way.

Here, I want to say that this idea is very good, but it's impossible for PIONEER to service for seventeen thousands of real estate companies. Even if we service for 1 company each day, we still can’t do this. Do any calculations, such as a business body whose dimension is around 50,000 m², can accommodate 200 - roughly 300 tenants, it will take 3 to 6 months, even 10 months to 1 year long. Only in this way, we can more clearly understand the operation conditions of each individual tenant within the incoming property curve, so that we can eventually piece together into the overall contribution of the rent.

Therefore, we can only look at vicissitudes helplessly. I only hope this essay can be read by more people and lead to job method innovation. Only then, we can gradually influence China, China will gradually repair its injured but seemingly prosperous body.

The scientific method is only effective to the right company and people. So the measurement method can be directly turned into the positioning tool in the early period of the planning and form a more operational rather than a beautiful orientated planning report. To introduce positioning with data and calculation formula is used to replace the nonsense sentences or shot loudly.

We have used the specific kinds of calculation methods for several years. At present, we get the most pressing impacts of electricity trade, we will launch a new and integrated measuring tool to cultivate and exercise the best employees from PIONEER to serve for companies And customers Consumer and society will benefit from this.

Here, in the end of essay, is just out of writing habbit, I’ll add one sentence: the future of the commercial real estate is at attaching great importance to the retail.

What? There is someone called space design, pedestrian flow and rental contract? Impossible, when the leather was missing how to find the feather?

Sorry, my language is too straight forward, please ignore the direct shallow intention. Thank you very much!

Writer: Louis WU