In the current situation where the commercial real estate market in China has entered a phase of stock game, the industry is filled with anxiety. However, there are still companies that, through a deep understanding of the industry and cities, have delivered examples of &#34;counter-cyclical growth.&#34;
Zhang Bin, CEO of Shui On Land, repeatedly emphasized in an interview: &#34;All vague projects will eventually be eliminated by the market.&#34; This assertion directly points to the industry's pain points—homogeneous competition and ineffective internal competition, and it is also Shui On's summary of navigating through economic cycles.
In Zhang Bin's view, Shui On Land's differentiated strategy is reflected in three key dimensions: deep localization, precise target audience positioning, and cultural empowerment with long-term iteration.
Having entered Wuhan for 20 years, Shui On has developed three representative projects in Wuhan, including Wuhan Tiandi, a landmark urban commercial project.
In 2005, Shui On broke through the old renovation of the Yongqing area in Wuhan, introducing Shanghai's &#34;Xintiandi model&#34; to the city, creating Wuhan Tiandi, which integrates high-end residential, Grade A office, and trendy commercial spaces. This project not only transformed a shantytown into an urban showcase but also became a hub for headquarters economy in Wuhan.
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In 2017, Shui On established itself in the Optics Valley Central City, launching Innovation Tiandi, continuing the knowledge community model of Shanghai's Chuangzhi Tiandi. The project focuses on technology innovation offices, smart commerce, and talent communities, with leading companies such as Hikvision and Glanro introduced into the commercial office sector. The super high-rise Grade A office &#34;Innovation Tiandi Enterprise Tiandi&#34; has fully opened for pre-leasing. Its commercial park has a signing rate of nearly 70% and is set to open on September 30 this year.
Launched in 2021, Wuhan Yangtze Tiandi relies on the century-old shipyard site in Wuchang Bay to explore the waterfront cultural complex model.
Last year, the total foot traffic in Wuhan Tiandi exceeded 40 million, with the comprehensive rental rates of Xintiandi Street, Yifang South Pavilion, and Yifang North Pavilion exceeding 95%. It attracted 47 first stores and flagship stores, including lululemon, SALOMON, and 3CE, while the Enterprise Tiandi business cluster gathered over 300 companies, including more than 20 Fortune 500 companies, becoming the core area of Wuhan's headquarters economy.
When entering new cities, Shui On respects the city's genes rather than simply replicating existing models.
For example, Wuhan Tiandi did not copy the Shikumen style of Shanghai's Xintiandi but instead integrated Wuhan's dock culture and local flavor. The project retained historical buildings while creating twelve uniquely styled commercial buildings and pioneered an outdoor food street, bringing significant foot traffic to the area.
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Zhang Bin recalled that the team spent three months &#34;tasting all of Wuhan,&#34; ultimately concluding: &#34;Having no characteristics is the biggest characteristic,&#34; with openness and inclusiveness becoming the core of the project
In response to the impact of the pandemic, Wuhan Tiandi launched &#34;Counter-Trend Renewal&#34; in 2020, replacing 95% of its original business formats with younger brands, introducing night economy and trendy retail, which increased the proportion of post-95 customers to 60%.
In addition, Shui On introduced flagship stores to promote the integration of brands with local culture. The Le Labo store in Shanghai Xintiandi incorporates elements of old architecture, while the first store of Chayan Yuesheng in Wuhan had a queue of 8 hours in a single day, both becoming phenomenon-level cases.
When discussing the understanding of flagship store economy, Zhang Bin believes that a deep understanding and respect for urban culture can help brands find new opportunities for rebirth. Even if certain brands already exist in the city, they can still be given new vitality through innovation and uniqueness. At the same time, focusing on Chinese culture and gaining insights into customer needs can provide stronger judgment, thereby helping brands rejuvenate.
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The success or failure of a business does not lie in the moment of opening, but in the iterative details year after year. In Zhang Bin's view, it is important to ensure that local residents and customers take pride in the project.
Against the backdrop of increasing debt pressure in the industry, Shui On regards light assets as an important growth driver, but its expansion path is filled with &#34;Shui On-style&#34; restraint.
Shui On's light asset model is mainly realized through equity cooperation, project management, and asset operation. As of 2024, Shui On manages a light asset scale of over 30 billion yuan through equity cooperation, fund management, and entrusted construction and operation, with partners including China Life, Pacific Insurance, and other institutions.
Shui On's light asset model is not merely about outputting management but emphasizes deep investment in &#34;knowledge assets and brand value.&#34; Shui On provides comprehensive services from planning to operational management for light asset projects, ensuring successful project operation. Even without direct investment, it invests in knowledge and brand assets, assuming corresponding responsibilities.
Through the light asset model, Shui On exports its brand and management experience to more projects. Wang Ying, CEO of Shui On Land, stated: &#34;Light assets are one of our future development directions. We hope to export our brand and management experience to more projects through the light asset model, achieving sustainable development for the company.&#34;
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Although hoping for growth, Shui On also declined multiple light asset invitations from Wuhan, with the core logic being &#34;not to engage in areas outside our expertise.&#34;
Wang Ying pointed out that the core of light assets is &#34;resonating with urban needs,&#34; rather than blindly pursuing scale. Shui On currently holds commercial assets valued at over 100 billion yuan, with rental income of 3.547 billion yuan in 2024, growing by 9% year-on-year, providing cash flow support for its light asset expansion.
In the future, Shui On plans to expand its light asset strategy to regions such as the Greater Bay Area and does not set limits on future project development in the two deeply cultivated cities of Shanghai and Wuhan. However, the company always insists on &#34;mastering one city thoroughly before expanding.&#34;
The following is a conversation between Wall Street News and Zhang Bin, CEO of Shui On Land, and Wang Ying, CEO of Shui On Land (edited):
Q: As the largest market outside of Shanghai, how will the three projects in Wuhan perform in 2024?
Zhang Bin: In 2024, the overall customer flow in Wuhan Tian Di will reach 18%, with annual foot traffic exceeding 40 million. The retail sector's occupancy rate will exceed 95%, which means the project is almost fully rented and can even start selecting quality tenants.
In the past few years, Wuhan Tian Di has continuously introduced brands that have never entered Wuhan, pushing for the landing of new brands since 2020. In 2024, the project introduced 40 concept stores of brands making their debut. For example, the Shanghai 3CE Korean brand and lululemon opened their first stores in Wuhan Tian Di, and these brands performed excellently in sales, either ranking first nationally or first in Wuhan.
Q: &#34;All vague projects will eventually be eliminated by the market.&#34; This statement has been mentioned repeatedly. How do you understand &#34;clear projects&#34;?
Zhang Bin: Simply put, the core of a clear project revolves around three questions: First, who are your customers, and what are their needs? Here, customers include both the city and individuals.
Second, if this company and project did not exist, where would customers go to meet these needs? In other words, who are your competitors?
Third, why do you believe customers will leave existing projects or services to choose you? Only when the value you create far exceeds that of your competitors can you form a core competitive advantage.
Value creation has two key characteristics: one is high value, and the other is irreplaceability. Only when both are present can it be considered true value creation.
From this perspective, we have clarified the basic logic of a clear project. Specifically for each project, our description of customers is very clear, including their social class, income, and preferences. Customer needs can be both superficial and deep-seated, and only by combining the two can we fully depict the customer profile.
The specific implementation has three dimensions: 1. Space: Through place-making methods, the project must clearly convey a unique sense of place and atmosphere. For example, during the renovation of Wuhan Tian Di's airspace, designers need to accurately describe the atmosphere of the place with one word. We assess the attractiveness of the place by observing customer behavior and expressions, such as in Wuhan Tian Di and Shanghai Chuangzhi Tian Di on University Road, where we observe pedestrians' emotions and interactions to determine whether the place creates a good atmosphere. The goal of Panlong Tian Di is to allow customers to relax and recharge here, switching their life modes; if this cannot be achieved, the project will fail.
2. Content: Content is the key to supporting the project's characteristics, including tenant types and flexible content. Tenant types cover common business categories such as dining and entertainment; flexible content refers to diverse activities arranged at different times and places, such as pet gatherings and fashion weeks. We use these two tables to ensure that the project content is rich and flexible
3. Service and Experience: Both online and offline services must fully consider customer needs. Regardless of how the brand is positioned, attention to customer needs must be reflected in the details. If the project promises to provide a lifestyle, then this lifestyle must be clearly presented in the space and services. The requirements for the project are very high at both the strategic and detailed implementation levels. New projects need to be refined repeatedly to ensure that our determination and commitment to customers can be realized.
Q: How will Shui On Land specifically implement the light asset strategy proposed in 2015 in the coming years? What specific business strategies are there?
Zhang Bin: Shui On Land's light asset strategy is centered on &#34;starting with the end in mind,&#34; focusing on residential sales and commercial properties in prime locations. By establishing special funds through capital operations or collaborating with parent funds and joint ventures, we aim to create specific product lines. In collaborations, we control the fund GP and project management, accurately planning and positioning projects based on urban research and community product advantages.
The development phase (PM), sales phase (SM), and asset management phase are key links in the light asset strategy. We will focus on our areas of expertise through these services, providing opportunities for capital and owners.
Currently, Shui On Land has obtained numerous development opportunities in Shanghai, Wuhan, and the Greater Bay Area, actively expanding its business and accumulating quality projects. These three regions are key areas for future development.
Wang Ying: The light asset model aligns with the company's strategic considerations and has practical necessity, especially since many projects are government-driven, which is quite different from previous operational methods. Therefore, we believe that light assets may be another feasible development path for Shui On Land in the short term, but this does not mean we abandon heavy assets. For example, the Zhao Jia Lou project remains a heavy asset investment, and we will continue to seek suitable heavy asset investment opportunities.
In terms of light assets, we have never pursued large-scale expansion. The heavy asset projects we choose are always efficiency-oriented and align with Shui On Land's advantages and development path. For light asset projects, we will not take them on casually. For instance, this year, there were residential projects seeking our cooperation, but they are not our area of expertise. We prefer community development, including core communities for urban renewal, neighborhood communities, light vacation communities, and knowledge industry communities. We will assess whether we can leverage Shui On Land's advantages based on the characteristics of the project, as we invest our most important knowledge and brand assets, for which we are responsible, not merely to earn management fees.
Q: What strategies does Shui On Land have for introducing new business formats in its first stores? How do you evaluate the contribution of first stores to project traffic and brand value?
Zhang Bin: The first store economy is a key area of focus for Shui On Land and has indeed brought good performance. Last year, we introduced over 40 first-time brands. In my view, the logic behind the first store economy is more important. The Chinese market has two persistent issues: one is oversupply, and the other is severe content homogenization. In many commercial entities, the homogenization ratio of brands with the same positioning is as high as 70%-80%, or even higher
In addition, many business projects face a core issue: a lack of content innovation, and the real needs of customers are not being met. For example, while Shanghai's Haipai culture has a unique charm, new narrative methods are rare. Many successful business models focus on high-end sectors, but these models are difficult to replicate.
These two issues constitute the current dilemma in business. The primary economy can partially address these problems by introducing new brands to avoid homogenization, but it cannot solve all business issues. If everyone is looking for homogenized brands in the same direction, it will lead to an unsustainable competitive state.
Our focus is on: First, co-creation. Even for the same brand, we will not just invite them over and call it a day. For instance, Le Labo opened its first store in China at Shanghai Xintiandi, and we hope it pays tribute to Shanghai's Haipai culture. The Blue Bottle coffee shop at Panlong Tiandi is similar; based on our understanding and respect for the city's culture, we made it a unique store globally.
We help brands find new opportunities through our capabilities, making them unique even if they already exist in the city. For example, KOLON SPORT launched a white magnolia-themed shoe at Shanghai Xintiandi, which was initially sold only there.
Second, focus on Chinese culture. Chinese culture is profound, including culinary culture, etc. For example, for the &#34;Nian Zhi Gao&#34; brand at Panlong Tiandi, we helped it revive through site selection, design, and traffic diversion, successfully replicating it in Shanghai. We also established a fund to support the revival of time-honored brands in innovative ways (RBF).
Third, if there are no co-creation opportunities in the market, we will step in ourselves. Taking Wuhan Tiandi as an example, in 2005, Wuhan lacked fashionable coffee brands, so we had to open our own coffee shop, introducing an Australian brand and managing it ourselves. We also launched projects like Foodie Social to meet market demands through our own innovations.
Q: Will co-creation or self-creation bring cost pressure? How does Shui On balance short-term cash flow and long-term asset appreciation?
Zhang Bin: All innovations come at a certain cost, but as we continue to explore, costs will gradually decrease. For example, after the success of the &#34;Nian Zhi Gao&#34; project at Panlong Tiandi, we replicated its model across more than a dozen projects, allowing R&amp;D costs to be shared, monetized, and recovered across multiple projects. Without the initial investment, scale expansion cannot be achieved, and one can only remain stagnant. Long-termism has another interpretation: you know why you are investing in what you are doing, whether it is simply a one-time attempt or replicating it across multiple projects.
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As the Chinese commercial real estate market faces challenges, Shui On Land's CEO Zhang Bin emphasized that ambiguous projects will be eliminated by the market. Shui On implements differentiated strategies through deep localization, precise target audience positioning, and cultural empowerment. In Wuhan, Shui On has successfully created several iconic projects, such as Wuhan Tiandi and Innovation Tiandi, attracting numerous enterprises to settle in and becoming the core area of Wuhan's headquarters economy. Shui On respects local culture in new city development and avoids simple replication

- In the current state of China's commercial real estate market, characterized by anxiety and competition, Ruian has demonstrated "counter-cyclical growth" through a deep understanding of the industry and cities.  
- CEO Zhang Bin emphasizes that projects lacking clarity will be eliminated, advocating for differentiation through localized strategies and cultural integration, as seen in their successful developments in Wuhan.  
- Ruian's light asset model focuses on strategic partnerships and knowledge investment, aiming for sustainable growth while respecting local culture and customer needs, with plans to expand into the Greater Bay Area.

Shui On Land's Zhang Bin talks about breaking the deadlock: We need to create projects with clear identities