The Tip Of The Chinese Iceberg
The Asia Society, in collaboration with Rosen Consulting group, released a substantial Special Report yesterday entitled Breaking Ground: Chinese Investment in US Real Estate. Notwithstanding the title, the report provides some compelling reasons why cities like Vancouver, Toronto, LA, Seattle, and NYC have seen only the proverbial “tip of the iceberg” when it comes to Chinese activity in the real estate sector. It’s a notion that should keep those of us in this sector fat and happy for some time to come, if indeed their hypothesis is correct.
Coming in at a weighty 110 pages, it’s a hefty read that will take more than your lunch break to get through. That said, I perused it over my morning coffee and reflexology session today, and discovered some very interesting insights that the VERV team will definitely pay attention to over the coming weeks, months and years.
Chinese capital deployment decisions, it seems, are not much different from capital decision-making in Europe and North America. Whether institutional or private capital allocation, motivations include business goals, macroeconomic conditions and personal concerns.
The motivators for Chinese institutional investors are somewhat unsurprising. They include:
- Longer-term outlooks that may look beyond cash flow to capital gain.
- A North American market that is much more liquid than other countries.
- Expansion of their corporate brand and a heightened level of business sophistication learned in the US and Canada.
- A constrained set of opportunities in China due to the slowing economy.
- A diversification of products, real estate vehicles and market entry points.
Similarly, the motivators for Chinese individual investors are not shocking, but are definitely insightful. The report outlines the following:
- Diversification, capital preservation and yield – our markets are a safe haven from volatility and the unknown.
- A highly sought-after education system. We all probably have a sense of this, but check out the numbers! In 2010, 127,000 Chinese students were enrolled at US universities. By 2015, that number had risen to 304,000!
- Pricing – even our prime markets (NYC, LA, YVR, TO) are much more attractive than markets in China or peer global cities.
- Pollution, water contamination and food safety are other drivers that push newly minted Chinese millionaires West in search of a cleaner, safer existence.
Chinese investment swelled from a trivial $10 billion in 2010 to a colossal $110 billion in 2015 for both residential and commercial real estate. But we ain’t seen nothing yet: that number is expected to explode to $218 billion in the next four to five years. The lion’s share of the growth over the past five years came on the residential side, averaging around $20 billion per year. If we believe this report, that number will shoot up to almost $50 billion per year sometime in the next 8 to 10 years. It’s staggering.
But be aware: the report isn’t all orchids and Maotais. It also considers potential factors that could hinder Chinese spending in North America – including government controls, turbulent economic times, and inflow bottlenecks by the US and Canada that might, at most, temper the growth we’ve talked about.
Over the past eight years, Chinese capital has flowed in mostly from the following sources:
- Sovereign wealth funds
- Tier-one Chinese developers
- Insurance corporations
- Very high net worth individuals
In the years to come, we will see more capital from a broader range of sources, including:
- Chinese REITS
- Tier-two and tier-three Chinese developers/builders
A note from the Asia Society report on that last group: “Wealthy individuals are already extremely active in the US residential real estate market, but the investment to date has only scratched the surface of the potential investment pool from Chinese individuals. Chinese individuals, as opposed to larger corporate investors, have generally accounted for most of the purchases of single family homes, condos, and small commercial properties. Estimates of the number of Chinese millionaires range from 1 to 4 million, trailing only the United States, while Boston Consulting Group estimated that the number of upper-middle-class households in China could reach 100 million by 2020.”
As I said, we ain’t seen nothing yet!
As always, if you need help deciphering your market give me a call – 778.997.2868
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Why Do We Only Do Real Estate?
Verv Projects is a collective of individuals who have specialized in real estate marketing for many years. While our roots and backgrounds are diverse, the common thread that ties together our kick-ass team is the branding, marketing and selling of property. Our greatest feats have been in the areas of residential, rental, industrial, commercial and recreational real estate over the past 11 years.
Residing in a city with one of the hottest housing markets in the world, it’s no surprise that we wanted to join the “cool” kids and showcase our talents in the industry. In doing so, we’ve had the opportunity to create some unique and, in our opinion, downright sexy campaigns for some of the biggest local real estate influencers and largest players across Western Canada and the United States.
Let’s just say we don’t plan to start promoting the newest gluten-free cereal or the hottest local restaurant on the block. (Unless, of course, either of these could help our clients sell more units!) We eat, breathe and sleep real estate. It is what we are great at, and why we create exceptional value for those we work with. If you want to market your cereal, we’re probably not your go-to. But real estate? Go with the specialists. We got this.
We have worked in several different real estate markets over the years… the searing hot markets in which product is gone faster than you can list it, and the cooler markets in which sales occur at a much slower pace. No matter the circumstances, each has excited and challenged us. Each has provided yet another case study and increased our knowledge base working within the industry.
Real estate might be our focus, but part of what we love about this business is that it’s not just buildings we are marketing: these are people’s homes. Everybody needs a place to call home, and we are privileged to participate in helping home-seekers find the perfect place to hang their hats.
What’s the future of Verv? We will continue to make our mark on the world of real estate by creating exciting, engaging content and strategy that compels our clients and their customers alike. We’ll nimbly navigate the evolving digital landscape and ever-changing consumer behaviours. And of course, we will continue to feed our passion for real estate in varied, always fascinating markets. Alas, no gluten-free cereal!
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The Verv Brand Platform
We’ve been building real estate brands for 11 years. Things evolve. One of the most challenging yet exciting evolutions we’ve seen is in consumers. They are more informed than ever; they have constant access to information, and lots of it (hello, internet). This challenges us; it requires us to build more compelling, strategically sound brands for clients.
Brands are more than just logos. Brands are entities. People emotionally engage with them, invest in them, and the brands they associate with are intertwined with their own personal identity. Because of that, it is crucial to set your brand up so that it makes perfect sense for consumers to invest. That’s where the challenge lies. With that comes the privilege of what we do.
So how do we do it?
- Start with research. Understanding fundamental dynamics around the market is the only place to start. We need to know:
- who is buying what
- how much they are paying for it
- what the competitive landscape looks like
- what threats might be out there
- what we can leverage
We mine for insights so we can come to any project as smart as we can.
- Define clear business objectives. This is another crucial element to the equation. Developments will always have restrictions and performance requirements that directly impact positioning and marketing strategies.
We use the data set to build brands that deliver on our clients’ objectives that are totally appropriate for our identified market segment.
There are three key steps to our brands.
- Brand strategy – we’ve developed a platform that outlines the ultimate ambition of a brand, the reason it exists, the values with which it operates, what drives the brand philosophically, and finally, the all-important brand promise.
- Brand positioning – all of our lofty idealism around our brand is irrelevant unless it is attached to concrete data from the research. This step in our process aligns the brand strategy to key imperatives, like the target market, the credibility of the product, differentiators from the competition, and facts that legitimize our claims.
- Brand Identity – this is the best part. We interpret all of the strategic thinking into an identity and design system that brings the brand to life in a compelling visual way (i.e. pretty shapes and colours). This is where our positioning is personified in the logo, our values are demonstrated in the key messaging and our product ambitions are clearly represented in imagery and copy.
Cool, but what are the results?
The Verv Brand Platform provides the foundation and frame of reference for everyone involved in the project. It consolidates efforts and unifies messaging, which delivers efficiencies across the board. No detail is exempt from this platform, not even the choice of door handles.
Marketing efforts are precise and aligned with the brand. We understand our market segment, how to engage with them, and more specifically, where to reach them. From premium hand-delivered invitations to commissioned blog posts promoting the hottest new venues in town, we are in the right places at the right time. This is all directed by our brand.
Once our consumers are paying attention, acquisitions are quicker to come by. End-users intuitively understand the product early on – thanks to accurate positioning –, which frees the sales team up to focus on the details. We have delivered brands that sold out two towers in ten days. Despite the rush, we still received compliments on our brand touch points: the brochure, sales centre, and digital experience!
The brand doing its job means all of your collateral, marketing and sales efforts will reinforce your price per square foot. You might be at the top of the market or have an entry-level product. You could be selling, or renting. You could offer commercial, residential, or mixed-use. The brand supports the price point and the product type. It’s all about delivering against our clients’ business objectives.
Some of our recent successes include: