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| Round-table Conference on the Practical Operation of Industrial Land |
Oct. 26, 2007 |
| This year the Central Government’s harsher policies have made the housing prices more unpredictable. More opportunities are being found in medium and small cities, and foreign investors become more eager to enter the market. Under such circumstances, how to secure a good investment? Where are the opportunities? How about the risks? And on what are new ways based? Hence, the two-day China Real Estate and Finance Annual Forum 2007 and the 1st China Real Estate Week, co-organized by New Real Estate Organization and Sys•Win Brokerage, took place in Westin Hotel in Beijing in Oct. 25th, 2007. Government officials, economists, representatives from financial organizations home and abroad and managers of real estate companies gathered together to discuss how to diversify finances, how to achieve win-win cooperation between sectors. The following is minutes of Round-table Conference on the Practical Operation of Industrial Land. Ren Huiyong: We don’t have many people here, so shall we pick a topic ourselves? How about the development trend of industrial land? Mr. Zhou has just given his speech. So shall I invite Mr. Lin to share with us some of Sys•Win’s cases of practical operation in industrial zones? Especially the upgrading of industrial land you just mentioned, and how to shift into industrial land industry and combine it with practical operation. Lin Yaxin: Sure. This is a topic about the practical operation of industrial land. From our experience, we have found that when talking about the so-called practical operation, we must consider factors like the nature of your real estate products, percentages of products of different natures, like office buildings and low-density office buildings. We must also think about the volume and area of each product, including indexes like the building layout. We need all these figures, which are what I think the most for practical operation. But when we work on the market positioning of our products, it is a difficult, complicated and also quite a boring task to get anything useful out of the figures. We think it necessary to develop some methodology to deal with them. Indeed based on our own experience and research, we have worked out such a methodology, which is what we call “three-dimension” analysis model. The three dimensions are what we have found the most important aspects in industrial land projects. The first dimension is how to maximize the development value. For this dimension, we must first think about what customers our industrial chain will attract and among them who will pay higher rent. These enterprise customers, who will pay higher rent, are what we are looking for to maximize our development value. Then we continue to look at what they want from the land. Do they want the land for R&D, production, or sales? Having answered these questions, we need to find out what property functions can meet the needs of the customers and we also need some data, like the number of employees of the enterprise, the usual scale of its operation, any special requirements in construction structure or property functions. Now we have a general idea of the design of the project. The second dimension is about competition in the market. Since value maximization may not earn us a competitive edge in the market, we think it necessary to take our competitors into account. We need to know more about our competitors and do some analysis. For example, we need to compare our industrial chain project with office buildings in downtown, with urban-type industrial zones in the urban area, with traditional industrial zones in the suburb, and other similar industrial chain projects. Do we have the same group of potential customers? What differences can we offer to attract these customers? The analysis on the second dimension is actually intended to make analysis results on the first dimension more objective, since the factor of market is brought in. Then we come to the third and also the final dimension, which is the development condition of the land in question. We may face many restrictions, like the plot ratio restriction and height restriction. We may have to consider the display function of the side of the building facing the street and the surrounding areas. These are the development condition. They will influence our design. We may have to adjust our design based on our analysis on the first and second dimension when taking into account the development condition. Based on such “three-dimension” analysis, a general design and the relevant data should be ready. We should be able to decide the nature of the product, its volume, number of floors, etc. This is what I would like to share with you about the practical operation of industrial land today. Thank you. Ren Huiyong: Thank you, Mr. Lin. Mr. Lin just introduced their analysis model of industrial land development. Now I would like to ask a question about winning customers. In terms of getting customers, is industrial land different from commercial land? Lin Yaxin: Yes, they are different. As I just mentioned, customers of industrial land are those who are willing to move from the urban area to the suburban area, who are willing to pay the additional commuting expenses, who are willing to bear the inconvenient transportation. I think these enterprise customers are quite different from the target customers for commercial land. However, I believe both commercial and industrial land development can get customers in the same ways. For example, if the industrial land developer brings in an industry by winning over some managers or some other ways, just as many industrial zones have leading industrial chains, like biology and medicine zones, software zones, if the developer brings in the leading enterprises in certain industry, chances are that other enterprises in the industry or the industrial chain will follow. But industrial land developers may also need to have a good knowledge of the characteristics of customers’ business operation. You may need to work out an investment analysis for the customers, telling them that what costs can be cut and what costs will go up when they move to the suburbs. You may need to analyze costs for employees and transportation for them. You may tell them that they can get 1,000 m2 in the suburbs at a price only enough for 500m2 in the urban areas. Price is an important factor to these customers. I think some other factors I mentioned just now, those in relation to customers’ needs, also play an important role in their decision. Ren Huiyong: Mr. Zhao, what’s your opinion? Liandong Industrial Zone is a well-known large-scale industrial zone in Beijing and now 90% of its construction is let out. I also know that Liandong Group are working on an expansion project, which also covers more than 1,000 mu. So, is the expansion project a decision based on the profitability of the early project? Do you think you have found the gold mine in industrial land development? Could you share with us your experience of getting customers? Zhao Jinming: It is far away from finding the gold mine now. But we feel this is a very promising business. The development inside the zone will see a rapid growth. Actually, we allocate our resource according to the location of our customers and the nation’s development plan. In terms of getting customers, we think, first of all, you must have a good knowledge of your customers. Customers looking for industrial land are different from those looking for other types of land. They have a different decision-making mechanism and different approaches toward costs. They have different approaches toward logistics, transportation, esp. movement of employees. So you must consider all these for them. As for our experience, first, we set up our own marketing team. Second, we have expanded our marketing channels, like establishing cooperation with top international banks. Third, we have adopted point-to-point marketing for potential customers. We can see that channel expansion has been essential to our success with customers. Next is service. We have our service department, like the software service department for zones, to provide our customers with high-quality service. This also helps us to get more customers, I think. Ren Huiyong: I think this is an all-around marketing model. I would like to add something about these models. Industrycome.com has been quite creative in developing such models. From my own work experience in real estate development and planning, I know that customers are essential to the success of an industrial zone. Although we decide how to develop a zone through project planning and early market positioning, the key to the success of the project lies in our ability to get customers. So, why does the website, industrycome.com try to develop a customer cluster for marketing? Actually, since our foundation, we have positioned ourselves as a marketing service provider. So questions like what kind of customers would choose industrial land are our major concern. Now that we have our website, we make good use of our customer cluster and we also conduct market research. So far we have regarded online marketing as our first choice, as it covers about 40% of the market. Our second choice is the traditional press, like newspapers and magazines, as well as investment fairs. Our next choice is advertisement like street advertisement. Therefore, industrycome.com has been working very hard on our customer cluster. When we introduce a new project, we have both online and offline promotion. Thanks to our website and customer cluster of 600,000 members, we can adopt the positioned business invitation model. Not every zone is a big project with 1,000 mu or a 30 to 40 people marketing team. Not everyone can afford such marketing. So we can help them with marketing. Our offline model follows the positioned business invitation model and the secondary market model. For secondary marketing, we establish the marketing alliance. We may have various ways of winning customers, but at the end we need to get to the customers ourselves. To get more customers for our zones, we have established 1,500 marketing alliances, which are marketing organizations and agents with access to various chambers of commerce, guilds as well as the government. These alliances can guarantee a wide network. In addition to the network, we have also established a three-round visit to our customers, which means that we pay our customers at least three visits, with first for informing, second for persuading and last for in-depth communication. After the three-round visit, we begin to select more potential ones from the pool on a ratio of 1 to 10. So far we have well kept our promises to our customers and they have been quite satisfied with our service. But I have a question concerning customers. Our industry and commerce chamber launches many activities and we have a lot of support from the press. But I don’t really know whether any industrial land developers are our members or their percentage in our total members. What’s the commerce chamber’s approach toward industrial land development? Do you view industrial land developers as developers or governmental investors. Zhong Bin: In fact, many commerce chambers have their own industrial land development projects. An example is the large-scale development of Haier, which we saw this week. Our commerce chamber is now working on a project covering several cities including Huangzhou, Dalian, Chengdu, Guiyang and Beijing. An important part of the project is industrial land development. Here there is a fact we have to take note of. In China, when you go to a city and say you would like to invest in industrial land, the government usually doesn’t show any interest. It is actually impossible to get any land for industrial development in some big cities, according to our experience. But if you tell them you are for commercial land development, they will give you a lot of land in good locations. In the same project, the developer may own Philippine tobacco in Hong Kong, commercial land in Dalian and industrial land in Shenyang. He has to do it this way. I would also like to talk about the large and medium listed companies like Haier and Shide. After reconstruction, they have become some of the biggest logistic service consumers. So their industry is closely related to their land development. Issues mentioned by some of our guests today are also their concern, like the inter-promotion between the industry and land development. This should be good for both. Some zones are called headquarter zones or cultural industry zones. Zones without industries will definitely suffer in the future. So what is the concern of many of us? It is the balance. If the government gives you land for industrial development, they want to see that your project does not only promote the industry and economy but also help with bringing in more revenues, job opportunities and stimulating competition. Meanwhile the enterprises look at their cash flows and profits. We have recently noticed something very interesting. 25 members in the same commerce chamber are setting up their own R&D organization. Why are they doing this rather than turning to the present R&D organizations. It is for tailoring to their own needs. So I think our topic today can also be called a gold mine not yet fully tapped. Industrial land is the biggest gold mine for us. Some of us are making progress. What are those companies obtained land recently asked to do？Industrial development No land is possible without industry. Another big company in Beijing, whose representatives were among our lunch party, also got a piece of land for industrial development. Ren Huiyong: So is industrial development a way to get land or is it the trend for the future? Zhong Bin: We are still thinking about this. Industry itself is important and not just a means to get land. You need to take into account industry, employment and so on. Our commerce chamber has a sustainable program, the most important part of which is the involvement of the industry. The core of the planning is the industry chain and the core of industrial development is provision of supporting facilities. Just now Mr. Lin mentioned our objective, which was driving urbanization. But urbanization will not succeed without the support of industry. So, industrial land development is part of urbanization. It contributes to the core urban competitiveness and also to the suburbanization of the city. Ren Huiyong: Can I say that industry is the means while development is the ends? Next is Q and A. We will have a 10-minute Q and A session. If you don’t have any question, shall I ask our guest speakers to conclude your remarks in one sentence? Would Mr. Zhong be the first? Zhong Bin: In a word, industrial land is definitely a gold mine to be tapped soon. Lin Yaxin: My conclusion is with the right combination of industry and land development and with the right operation, industrial land is definitely a gold mine to be tapped. Zhao Jinming: We believe finding out the operation principles of industrial land development is the key to success. If we can find out the principles, it will definitely be a gold mine. Ren Huiyong: Industrial land is the new trend in land development. Zhong Bin: So much for today. Thank you very much. |
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