One late night in November 2021, Chengdu.
The cold wind of less than 10°C swept the fallen leaves on the street, and no one could be seen on the road.
The restaurant owner, Xiao Zhang, calmly locked the door of his shop as usual. It’s just that on this day, there is an extra piece of A4 paper on the door, and the paper is printed with “Wangpu transfer, contact number 139XXXXXXXX”.
Xiao Zhang stood by the deserted street for a while, as if thinking about something, completely ignoring the leaves that were carried by the cold wind and clinging to his hair.
Suddenly, a mobile phone push interrupted his daze:
“As of 10:00 a.m. on November 12, 2021, there were 24 confirmed local cases in Chengdu, and there were no new local cases on November 10 and 11…”
More than a month ago, in the face of the dismal account book, Xiao Zhang, who was helpless, received a call from the property management company and asked him if the store wanted to renew the lease.
“This year is the same as in previous years, just increase by 30,000.” That is to say, in the next year, the rent will increase from 260,000 to 290,000.
In the face of the constant news of the epidemic, Xiao Zhang finally decided to close the small restaurant that he invested more than 700,000 to open and managed to maintain for 4 years.
Since the location is not bad, after a period of time, someone took over Xiao Zhang’s store with a transfer fee of 15,000. The 700,000 investment was discounted to 15,000, Xiao Zhang felt helpless and a little fortunate.
In May 2022, the “May 1 Golden Week” did not bring about the expected business recovery. Chengdu small and medium-sized catering entrepreneurs jointly asked for help, calling on landlords and commercial property companies to reduce rents.
In the letter for help, they refer to the landlord as a “partner” and look forward to “fighting side by side and hand in hand.”
Although this letter of help attracted media attention, very few landlords actually responded to rent reductions, and few stores received rent reductions or exemptions. Some shop owners told the media that during the epidemic in February this year, when renewing the contract with a commercial real estate company, they were even asked to increase the rent by 30%.
Even if survival is so difficult, rents still have to rise. In front of landlords, especially commercial company landlords, small shop owners have no chance of bargaining, either accept or close the shop.
It is estimated that the total number of “husband and wife” catering shops serving the community across the country, including stores, outlets, mobile stalls, and large and small stalls, will not be less than 10 million. Among them, there are no less than 5 million mom-and-pop shops selling breakfast alone.
Small stores are not only “the food and clothing of thousands of workers” in the catering industry, but also the three meals a day for hundreds of millions of people.
Does the rent have to go up every year?
In this regard, Hong Kong, which is ahead of us, is of great reference value.
01
In Causeway Bay, a popular area in Hong Kong, there are hardly any crowded street shops. Passing citizens and tourists can only queue outside the store, buy and leave.
Such a small shop requires at least 100 million Hong Kong dollars (about 86 million yuan) to buy, which is a figure beyond the reach of ordinary people. It can also be rented, with an average of 200,000 Hong Kong dollars (about 170,000 yuan) per square meter.
The Hong Kong media estimated that the small stall would have to sell 1,000 skewers of fish balls every day, earning enough HK$60,000 (about RMB 52,000), just enough to pay the rent.
Since the 1980s, the streets of Hong Kong have been able to afford exponentially increasing rents, and there are few couples and individual shops that have survived to this day, such as Chezai Noodles, Wonton Noodles, and Siuwei Rice.
Although there are many shops in the residential area, there is no fireworks and the familiar smell of the community, and the greeting of “off work” is no longer heard. Some are just subtle calculations between cost and price, profit and rent.
The reason for the current situation is inseparable from a group of people. Among this group of people, there is an outstanding representative – Li Ka-shing.
In the 1950s, Li Ka-shing, who earned his first pot of gold from the plastic flower factory funded by his uncle, felt that the profit of manufacturing was too low and that innovation was needed to maintain his advantage, so he decided to switch to the real estate field.
After all, at that time, the real estate tycoons in Hong Kong pioneered the “selling off-the-plan”, and the building was sold before the building was completed. It showed the amazing wealth-making ability to all those with wealth ambitions at that time.
In 1958, Li Ka-shing built a 12-storey industrial building in the North Point of Hong Kong Island and entered the real estate market. Two years later, he built a second industrial building in Chai Wan.
The two tall buildings did not make Li Ka-shing stand out.
The turning point of the story took place around 1965, when the overheated “off-the-plan” speculation had an impact on Hong Kong’s finance. In the following decades, Hong Kong has continued to strengthen the management of off-the-plan property sales in order to curb the inflated real estate bubble.
Maybe it’s the control of the policy, maybe it’s knowing that the house that can be built is always limited. If you want to do big things, you must consider how to make money after the house is sold. In the process, Li Ka-shing gradually realized the “true meaning” of business investment: controlling the pipelines and entrances and exits – just like a water supply pipeline, as long as you control the opening and closing valves, you can sit on the ground and collect money.
Since then, Li Ka-shing has started the “buy, buy, buy” mode:
In 1973, it acquired ParknShop Supermarket; in 1977, it acquired Hong Kong Hilton Hotel and Shopping Center; in 1985, it acquired Hong Kong Electric (Electricity) Group Co., Ltd.; in 1987, it acquired 43% of Husky Oil; in 1996, it acquired Coming mobile phone, paging and fixed network resources, established Hutchison Telecom…
In Hong Kong’s residential market, one out of every seven residential areas is developed by Li Ka-shing; in the field of commercial real estate, his PARKnSHOP and Jardine’s Wellcome share the Hong Kong retail market, keeping Wal-Mart and Carrefour out.
His investments have always revolved around “entry and exit”, ports, energy, communication networks, and most importantly, land…
Even after the establishment of an investment company focusing on the Internet field, Victoria Harbour Investment, the projects Facebook, Skype, Spotify, Siri, Waze, Summly, etc., all have the characteristics of Internet entrance.
The reason is very simple, no matter your physical body, money, gas, signals, etc., as long as you flow, you must leave “buying money”.
In fact, it is not only Li Ka-shing who does this. Hong Kong’s “Four Families” and other giants are all like this. Land, residences, properties, and ports have always been the focus of their investment.
In Hong Kong, as long as one takes a breather, a part of the expenses incurred by that person’s food, clothing, housing, and transportation will always be part of the tax paid to these real estate developers.
In addition, Hong Kong businessmen clearly understand a truth: if the faucet is not turned off all the time, there is no valve. Only when the faucet is frequently turned on can people be willing to pay high prices for water.
The marketing world sums it up neatly: squeeze toothpaste.
Therefore, a large amount of land was held in the hands of Li Ka-shing, who slowly squeezed and waited for the appreciation.
Then the government opened another faucet to increase the supply of land. Wouldn’t the Li Ka-shings be helpless?
A few years ago, the Hong Kong government put forward a plan to solve the problem of insufficient land supply in Hong Kong by reclamation, so that 1,700 hectares of land could be added to create houses for 700,000 to 1.1 million people.
If it is successfully implemented, at least in the housing sector, Li Ka-shing will not have the possibility to tighten the faucet.
However, the plan was resisted by Hong Kong people, who accused it of being “obsessed with infrastructure, ignoring people’s livelihood” and “destroying marine ecology”.
In fact, as early as 1997, the then Chief Executive Tung Chee-hwa proposed the “80,000 Five-Year Plan” to build 85,000 houses every year for low- and middle-income people, and solve 70% of the housing problems of the citizens within five years.
As soon as the plan came out, 500,000 Hong Kongers rushed to the streets and frantically opposed the government’s plan.
It turns out that many high-ranking middle-class people are worried that the supply will increase and the value of their houses and shops will shrink.
Controlling the buildings on the ground through the land also controls the space. And those who live in this space naturally become “adherents” in the chain of interests. They are powerless to resist, and even resolutely maintain the entire chain.
Those who have been to Hong Kong will find that when walking through the properties of Hongkong Land (which belongs to the same Jardine as Wellcome mentioned above), the logo, music and fragrance are completely the same inside and outside the building.
The sky bridges connecting the buildings appear to provide convenience for pedestrians, but in fact, they become pipes, guiding the flow of people from the ground and the subway and locking them on their own “sites”.
The entire city was secretly demarcated and divided up.
“In Hong Kong, I use Li Ka-shing’s internet, take Li Ka-shing’s car, add Li Ka-shing’s oil, go to Li Ka-shing’s supermarkets and shopping malls, and go home at night to live in a ‘pigeon cage’ built by Li Ka-shing. Li Ka-shing, The city of the Li family.”
02
The story of Hong Kong tends to give the impression that real estate is “unforgivable”. But in fact, real estate is not “all harmless” to the development of a country’s economy.
Especially for countries that are at the juncture of accelerating urbanization, real estate is in a position to twist the driving force of society forward.
At the beginning of the 20th century, after China joined the World Trade Organization, the growth rate of economic development reached a new level. However, many voices at that time believed that China was facing the risk of recession.
After all, from a global perspective, there has been a lesson from the past: the middle-income trap, also known as the “Lessons of Latin America.”
This concept mainly describes some countries in Latin America and Southeast Asia. When the per capita income reaches the middle level of the world, very few countries can go further into the high-income countries, but will fall into a state of stagnant development and economic turmoil.
It is generally believed that a country’s per capita GDP is between $3,000 and $10,000, which is the stage most likely to fall into the middle-income trap.
In 2006, the per capita GDP of mainland China just exceeded 2,000 US dollars. It can be said that it is about to step into this “dangerous zone”. At that time, many people of insight launched a heated debate on “whether China will fall into the middle-income trap” and “how to deal with the possible stagnation or even retrogression”.
Around 2006, Liu He, then deputy director of the Office of the Central Financial and Economic Leading Group, led a team to Chile and Argentina to conduct special research. , the middle class who own property and strive to be upwards, is a strategic move to avoid the middle-country trap.”
As the saying goes, “those who have constant production have perseverance”. Having a regular job, having real estate, and working hard go hand in hand.
As long as people who work hard are guaranteed to have jobs and can afford a house, there is no problem.
In the past period of time, the real estate industry has indeed played a certain role in promoting development.
On the one hand, the real estate industry has absorbed a large number of laborers with relatively limited education, providing them with an income comparable to urban white-collar workers; on the other hand, it has stimulated the flow of upstream and downstream funds from the demand, bringing related industries prosperity.
In the process, a large number of people entered the city and transformed into the middle class, and many people also shared the dividends brought by the country’s development through rising housing prices.
However, the real estate developers who took the lead in this big development and ate the most dividends have never forgotten their “teacher” – the game of Hong Kong real estate developers.
In addition to learning “high turnover” and “shared area”, the most important thing is to learn to “close the valve” – hoarding is unusual.
But after all, it is not the capital that has the final say in the mainland. It is not acceptable to hoard land. There is a high possibility that the land will be reclaimed by the government. So what? Houses, “covering the market and reluctant to sell” or deliberately slowing down the development progress to push up housing prices.
Around 2014, in response to the country’s regulatory policies, real estate developers frantically “covered their stocks and reluctant to sell”, resulting in nationwide inventory problems.
At the Central Economic Work Conference at the end of 2015, in response to the problem of high real estate inventory, it was proposed that the key points of economic development in 2016 are to reduce production capacity, reduce inventory, deleverage, reduce costs, and make up for shortcomings. Governments at all levels and the central bank have issued policies to promote growth at both ends of supply and demand.
However, real estate developers seem to have ushered in a new carnival, scrambling for second-tier cities to grab the new demand brought about by monetized resettlement. In 2016, housing prices in second-tier cities such as Hefei and Xiamen even doubled.
To put it bluntly, it is still the same way of playing in the past.
On September 30, 2016, in the face of rising housing prices, 19 major cities across the country issued regulatory policies, restricting purchases, loans, sales, prices, and signings. This was the beginning of what came to be known as the “Five Limits”.
The “price limit” imposes strict restrictions on the profit of a single real estate project, and the means of “closing the valve” such as “covering the stock and reluctant to sell” are useless.
Also in 2016, cities such as Beijing and Shanghai have successively set up competitive and self-sustaining indicators in land auctions. This means that if you want to acquire land, you must promise to hold a certain percentage and not sell it. Whoever promises a higher percentage will get the land first.
These self-contained areas can be used for apartments, and some can also be used to plan businesses. If real estate developers follow the policy direction to transform in a timely manner, and do a good job in the operation of these self-owned areas, it is equivalent to using funds to contribute to the development of the city, and they can also earn long-term benefits, which is not a bad thing.
But self-sustaining means that a lot of funds are locked in the project, and it may take 10 years to recover the original income from selling a house. Real estate developers who are accustomed to making quick money must be unwilling to do it, and the self-sustaining area can be said to be “people hate dogs” in the industry.
What to do then?
At a general meeting of shareholders, Sun Hongbin said that Sunac has a large number of partners in the open market acquisition of land, and the self-holding part has been taken away by the partners, so Sunac has a great advantage in competing for self-owned land.
Some real estate developers have even been revealed that regional companies sell their own area privately at 30% off the market price, while the headquarters turns a blind eye and makes up for the book loss in the form of an increase in the price of the sales area.
Gradually, some real estate developers found that the demand in the residential market is really not as strong as before. After several rounds of housing price rises, those who could afford it bought it early, and those who couldn’t afford it really couldn’t afford it.
The house is not easy to sell. As early as 2014, Vanke Yu Liang proposed that real estate will enter the “Silver Age”, and in 2018, he even shouted the slogan “Live”.
During the period of downturn in the industry, real estate developers thought of the way their teachers played in Hong Kong. Since people who use high housing prices to harvest people who enter the city will not be able to collect the “city tax”, then “increasingly transfer the stock”, make a fuss from the “stock”, and round up the consumption of ordinary people’s clothing and food, and collect the “clothing and food tax”. “.
Does this mean that the developer has to manage the self-sustaining area well?
No, guarding one or two shopping malls and apartments developed by themselves, how can they form a monopoly, and how can they switch valves at will? They are more “advanced” than Hong Kong real estate developers, and have developed a “asset-light” model.
What is asset light? To put it simply, it is to rent some properties, and the real estate developer turns into a “commercial management” company and becomes the second property owner.
In this way, a single project does not require a large amount of capital, but “buying road money” is firmly in its own hands.
Under the circumstance that the price of real assets has been pushed to the peak by them, this “asset-light” model can also avoid the cycle of falling asset prices and transfer the risk.
“We take the benefits, and the risks depend on everyone.”
03
When shouting “Silver Age” and “Incremental Transfer of Stock”, real estate developers have realized that it is more and more difficult to collect “city tax” through high housing prices.
Especially since the epidemic, it has become more difficult to sell houses, so they have accelerated the pace of harvesting the “food and clothing tax”.
According to statistics from Winshang Big Data, by the end of 2021, 29 major commercial real estate companies have won 388 asset-light commercial projects. By the end of March 2022, that number had climbed to 417.
In April this year, Wanda Group, which used to spend money on properties around the world, announced that it had won the overall management rights of two well-known commercial real estate projects in Beijing, SOLANA Blue Harbor and Beijing Wukesong Zhuozhan Shopping Center. The cooperation methods are all asset-light.
Not only in the field of shopping malls, but also office buildings, hotels, and apartments are also the goal of real estate developers to achieve light assets through property management.
According to the data of the China Index Research Institute, the number of listed property service companies in China has risen rapidly from 1 in 2017 to 14 in 2021.
In 2021, the top 100 property management companies in China with a market share of 52.31% will have an average contracted area of 76.8363 million square meters, a year-on-year increase of 17.1%, and an average management area of 56.9298 million square meters, a year-on-year increase of 16.7%.
In the field of shopping malls, long-term contracts of 5 to 10 years are not signed, and only short-term contracts are signed with merchants, and the rent increases every year.
In the apartment sector, not only does the rent increase every year, but also inexplicable “service fees” are charged. Water and electricity are more expensive than the market price, and extra charges for washing machines and public kitchens are required.
The space of a city cannot be completely monopolized by a real estate developer, but by controlling key nodes, the pricing power is firmly controlled. Just as Li Ka-shings control the valve, real estate developers control the price of space in the entire city by controlling the major plots of a city.
Even the owners and landlords of individual shops will anchor their own rents based on the space prices negotiated by these real estates, which will lead to an overall increase in rents.
As long as everyone rises up, as consumers who are deeply involved, they have no idea who to point the finger at.
This control of space makes life weirder in unexpected ways.
At the end of July, a report by China News Weekly, After the epidemic, did rent “make up“? sparked a discussion. According to a reporter’s interview, not long after Shanghai was unblocked in June, the rent immediately ushered in a “compensatory increase”.
The young people interviewed said that the landlord asked for a 20% increase when he opened his mouth. A 6,000-yuan house in Shanghai’s Putuo District even jumped to 7,900 yuan after the lockdown was lifted.
Some respondents simply chose to rent a hotel. Although the space is a little smaller, it is closer to the company and more comfortable than an old house, saving a lot of money for a month.
“It is cheaper to live in a hotel than to rent a house”, this statement would have been popular with laughter ten years ago. Now it is indeed on the hot search, but it is reality.
In the context of the epidemic, rents are not falling but increasing. In early June, a Ziru user said in an interview with Beijing Business Daily that when Ziru renewed the contract, it raised the rent by 11% in one go.
Taking advantage of the fact that it is not easy for tenants to move during the epidemic, Ziroom has increased rents against the trend, with a lesser increase of 6% and an increase of 21%. Controlling the space not only controls the rent, but also determines the “content” in the space: what can be sold and what can’t be sold, the real estate developer has the final say.
In June of this year, Zhong Xuegao, who sold ice cream for 18 yuan a piece, was scolded on the hot search. In order to defend the cheap ice cream, netizens created a kind of online literature “Snow Lotus Literature”.
Some media interviewed the convenience store. For the same ice cream, the previous old brand gave the store less than 1 yuan. Zhong Xuegao’s 18 yuan ice cream directly raised this number to 8 yuan or even higher.
Once a bottle of bottled water of 1 yuan, selling “1 piece” of 12 bottles can be divided into 1 yuan for a convenience store, and a “porter of nature” can achieve this figure by selling only 1 bottle.
In the past, in order to seize the market, there was a price war and price reductions for commodities. Now it is still a price war, but it has become a price increase.
Such a counter-intuitive thing, but it is very real: whoever bids higher, whoever pays higher cost for space, whoever can stay.
Not only the small commodities in convenience stores, but also the catering industry has become “deformed” under this logic.
There is an old saying in the field of commercial real estate, “The ping effect of the catering industry is like water in a sponge, and there will always be a squeeze.”
The flat efficiency here refers to the revenue that the store can contribute to the lessor, which is intuitively understood as the daily rent per square meter.
The meaning of this old saying is that there seems to be no upper limit on the rent that restaurants can contribute, and it can keep rising.
Faced with real estate companies that firmly control the space, husband and wife restaurants may not even have the opportunity to negotiate prices.
On the other hand, chain restaurants are also fueled by capital, and they are chasing these small community stores.
As early as 2018, Starbucks opened community stores in the most densely populated communities in Zhengzhou. Half of Xibei’s new stores in Shanghai are located in the community. He Guangqi, chairman of Xiabuxiabu, also told the media that “community stores will be vigorously opened in the future.”
In 2020, when the epidemic broke out suddenly, the total number of Haidilao restaurants increased from 768 in 2019 to 1,298, with 544 new stores opened and only 14 closed, a net increase of 530. Xiabuxiabu has a net increase of 179, and HEYTEA has a net increase of 304.
Yum China, the parent company of KFC, is even more exaggerated, with a net increase of 1,306, almost double the net increase of 716 in 2019 before the epidemic.
The continuous expansion of these deep-pocketed chain restaurants has given property management lessors the confidence to raise prices. As for the small husband-and-wife stores that cannot sustain the rents that have risen year after year, they don’t care.
However, is it a good thing that chain restaurants have paid a higher price and won the right to use the space?
Since the cost of space is so high, and the landlord has to increase the rent year after year, it can only increase the price and reduce the cost in other places.
In 2020, Haidilao, which is crazy about expanding stores, chose to increase the price to more than 110 yuan per capita in response to rising costs. As a result, net profit fell by 86.8% year-on-year. The founder Zhang Yong admitted that “the trend was wrongly judged”.
More catering companies choose the central kitchen, reducing the back-end kitchen manpower by nearly 40% in terminal stores, reducing the back-end kitchen area by 60%, and reducing the cost of purchasing ingredients by 3%. Even chefs with an average monthly salary of about 5,500 yuan have been “eliminated” as a costly burden.
According to statistics from iiMedia Research, in 2021, the scale of my country’s prefabricated vegetable market will be 345.9 billion yuan, a year-on-year increase of 19.8%.
Many consumers simply do not choose to go to restaurants. According to data from the National Bureau of Statistics, from January to April 2022, the national catering revenue was 1,326.2 billion yuan, a decrease of 5.1%, of which the national catering revenue in April was 260.9 billion yuan, a year-on-year decrease of 22.7%.
In addition to the catering industry, the clothing industry is also under the “food and clothing tax” of real estate developers.
On the one hand, in order to cope with rents, clothing brands have to increase prices every year. In 2016, the media investigated the price increase of clothing. According to a listed clothing company, it is an industry practice to increase the price of winter clothing by 10% every year. In the winter of that year, it increased by 20%.
On the other hand, the catering industry is down, and it is also the clothing industry that suffers. Why do restaurants in brick-and-mortar businesses open on the highest floors? Because the catering format is the most useful diversion tool. Stream for whom? Clothing store in the mall.
According to the market research of Guosheng Securities on the apparel field, in the first quarter of 2021, the operating income of key companies in the mass apparel sector fell by 4.3% year-on-year, and the performance fell by 19.7% year-on-year.
Some media conducted a survey of shopping malls in first-tier cities and found that in the core business district, except for a few brands that can still sell small profits but high turnover, it is almost impossible to find clothing with a unit price of less than 1,000 yuan.
“Civilian price” clothing was driven to e-commerce. While the performance of the mass apparel segment declined, the operating income of the mid-to-high-end apparel segment, which sold high-priced items, increased by 0.8% year-on-year.
Real estate companies have successfully screened out the brands they want to keep by firmly controlling the space.
Originally, clothing, as a consumer product that needs the most “trial” and “improvised consumption”, has now been rushed to the Internet in large quantities. It is impossible to try it. After buying it, it takes a few days to touch it. , and then send it back… This matter is very strange when you think about it.
end
Although Li Ka-shing believes that only by controlling these “entry and exit” businesses of clothing, food, housing and transportation can he ensure his business territory is “stable for all eternity.”
But Chief Executive Tung Chee-hwa must have seen through the absurdity: only relying on pipes and valves cannot create water sources.
In 1999, he proposed to develop high-tech and build a “Cyberport”, and wanted to bring “source of living water” to Hong Kong’s development through the development of the Internet and high-tech industries.
However, after several twists and turns, this plan came into the hands of Li Ka-shing’s son Li Zekai. Through a whole set of business operations, he returned to the way of speculating land and selling luxury houses. Of course, there was no result.
In May 2015, the state issued the document Made in China 2025, proposing a ten-year strategic action plan for a manufacturing powerhouse; in 2018, the state proposed the development of new infrastructure construction.
In the face of these clear policy orientations, some domestic businessmen who have saved a lot of capital through real estate are hesitant to move forward.
For companies and capital that have been working in the real estate field for many years, investing in emerging technology and high-tech industries, how can it be comfortable to make quick money, even if you invest in the construction of some industrial parks, the idea is to harvest technology companies.
In 2016, the state put forward a plan to cultivate about 1,000 characteristic towns with distinctive and dynamic characteristics such as leisure tourism, business logistics, modern manufacturing, education technology, traditional culture, beautiful and livable, etc. by 2020, to drive the construction of small towns across the country. .
Real estate companies have said that “I will, let me do it” in the construction of towns. So they replicated the set of building houses, selling houses, high turnover, monopolizing space, and increasing rents.
No matter how the policy is guided, some capital still likes to exert force on monopoly channels and monopoly space. Even if they appear as spoilers at the beginning, once they control the channels, they will soon become “evil dragons” and press on others’ heads. Pay for the rising rent and channel costs.
Fortunately, the “liberal” rhetoric that the government can’t interfere with private enterprises has become less and less popular in mainland China.
Fortunately, China is big enough, and there is always no shortage of people with long-term vision. They follow the policy and invest in the fields of photovoltaics, new energy, cloud computing and other capital and enterprises, and now they have achieved quite good development prospects.
Is capital and enterprises completely unwelcome in the consumer sector?
I think that most people are not brainless opposition. They just hope that these companies that focus on people’s livelihood and consumption and the capital behind them will not always think about harvesting the “food and clothing tax”, but return to the original intention of “consumption upgrading”:
Let people buy more abundant and better quality goods at reasonable prices, and enjoy due services.
It will not be a bad thing for everyone in the business to incorporate social responsibility into corporate strategy, rather than just talking about it.
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