Renhe dominates underground shopping malls

Renhe aims to have new starts of 1.5m sq m, 1.8m sq m and 2.2m sq m in 2011, 2012, and 2013, respectively.

Year to Sept, it has 1.2m sq m started, while 280,000 sq m was sold at an ASP of 20-30k/sq m. Renhe indicated that selling a greater portion of GFA under management is necessary to fund the larger cost associated with the higher number of projects under construction. By 2012, it will have higher rental income to cover construction cost such that it can return to the target model of 30% for sale and 70% for lease, rather than the existing 50%/50% split.

The company traditionally targets whole sellers, but it is now also attracting retailers due to its projects’ central locations. It claims that it has not seen its ASP or rental rate declining due to the change in client mix. But it does acknowledge that its retail clients are more price sensitive.

While approval from civil air defence agency is essential, the company believes it is more important to have the support of local government entities. The company says the current tender process favours those with a proven track record. With its long operating history, the company believes it has virtually no large competitors, as it has won 100% of the projects it competed in last year.