China’s non-real estate State-owned Enterprises (SOEs) often face challenges with idle or under-utilised properties outside their core business due to insufficient property management expertise. These assets require immediate attention to unlock their latent value.

A JLL analysis of SOE properties in Guangzhou (excluding residential, logistics and infrastructure) highlights key characteristics:

• Older properties dominate, with about 60% being over 15 years old
• Office and retail spaces are the primary types, comprising roughly 70%
• Over 60% are located in old urban areas

Market volatility has heightened the challenges of preserving and maximising the value of SOE properties. As cities shift towards sustainable development, revitalising these assets is crucial to boost urban vitality and competitiveness.

New consumption trends driving commercial demand

China’s ageing population, shrinking household sizes, and evolving consumer preferences have sparked new commercial demands, especially in top-tier cities. Emerging sectors such as long-term rental apartments, limited-service hotels, and private healthcare are steadily expanding.

According to JLL, the average occupancy rates for long-term rental apartments in China’s top-tier cities are notably high. In the first half of 2024, Guangzhou and Shenzhen achieved  98% and 96% occupancy rates due to a significant proportion of rental tenants. Additionally, the number of mid-to-high-end rooms in four major hotel chains (Jinjiang, H World, BTH and Atour) increased by 15.7% year-on-year in 2023. High-value services like senior living apartments and maternity centres are also set for growth in major cities. As demographic shifts and consumer preferences evolve, the market penetration of these sectors is expected to increase.

Aligning SOE assets with new property demand

Emerging sectors prefer densely populated, well-connected urban areas near public facilities. They require adaptable properties that allow space modifications and comply with safety standards. JLL’s study shows that many SOE properties meet these location and architectural requirements. Moreover, these sectors’ asset-light strategies and favourable market performance align well with SOEs’ goals to revitalise assets while adhering to regulatory standards.

Figure 1: Cooperative models of new types of consumption

Source: JLL Research, based on market information

Through targeted rehabilitation and collaboration with professional operators, SOE properties can enhance their competitiveness and better meet market demand. Furthermore, supportive policies, alternative refurbishment models, and technological feasibility provide a solid foundation for transforming these properties.

URE: Enabling urban asset cycles and sustainable growth

JLL has introduced the Urban Real Estate Strategic Approach (URE) to optimise resource allocation, balance supply and demand in the asset market through comprehensive planning, and promote the refurbishment of old properties. URE creates win-win opportunities for both cities and enterprises by innovating asset management, infusing financial resources, and fostering a dual cycle of assets and capital.

Figure 2: Dual cycle of assets and capital

Source: JLL Research

For SOEs, URE offers multiple benefits, including diversified funding, asset repositioning, and professional management. These strategies reduce financial burdens, increase flexibility, and support sustainable operations. Moreover, strategic divestments in secondary markets help SOEs streamline operations and improve governance.

From a societal perspective, revitalising SOE assets enhances corporate image, provides valuable operational models, and stimulates investment. Furthermore, it allows cities to renew urban spaces and foster efficient economic flows.

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