Wanda Led China’s Commercial Developers Again in 2022 with 7% Growth

China’s top commercial developers saw their operating income rise more than 5 percent in 2022, with Dalian Wanda Group’s mall-building business once again dominating the pack, as the mainland’s housing market crisis and sluggish economy left the country’s largest commercial landlords mostly unscathed.

Zhuhai Wanda Commercial Management Group hauled in RMB 46.45 billion ($6.7 billion) in operating income last year, two and a half times that of its nearest competitor, China Resources Land, according to data from the China Real Estate Information Corporation.

The unit of Wang Jianlin’s property empire saw a 7 percent increase in its operating income over 2021, a trend echoed by the company’s peers. China’s top 10 builders and managers of malls, offices and hotels reported a combined RMB 133.18 billion in 2022 income, rising 5.3 percent from the previous year’s total of RMB 126.51 billion.

The performance boost for commercial developers contrasted sharply with trends in China’s residential market, as home sales plunged more than 28 percent by volume in 2022 and a string of homebuilder defaults prompted government action to bail out the industry.

Red Star, R&F Struggle

The top six companies on CRIC’s ranking kept the same places last year that they occupied in 2021, with Red Star Macalline, Longfor Group Holdings, Seazen Holdings, and China Vanke trailing Wanda Commercial and China Resources Land.

China Vanke reported the biggest income jump at 29.3 percent, while Seazen, Longfor, and Red Star saw income growth of 16.7 percent, 13 percent, and 1.8 percent, respectively.

Wanda Commercial, which applied for a Hong Kong IPO for the third time in October, operated 425 Wanda Plaza malls in mainland China as of the end of June, with 285 being owned by Wanda Group. The company reported an average occupancy of 98.6 percent for the malls under its management as of June.

With a slight drop of less than 0.1 percent, China Resources Land was the only firm among the top six that recorded a decline in operating income in 2022. The Shenzhen-based property giant, which also ranks as China’s fifth-largest developer by contracted home sales, is an arm of state-owned conglomerate China Resources.

Red Star struggled to grow last year, as the Alibaba-backed home improvement mall chain faced liquidity challenges and, in the first half of 2022, declining occupancy at its mall portfolio, according to Fitch Ratings, which withdrew its credit rating for the company in September. State-controlled Xiamen C&D Inc. agreed to buy a potential controlling stake in Red Star this month.

Among commercial developers, Guangzhou R&F Properties, which ranked seventh in 2021, slipped off the top 10 ranking last year, while Suning Real Estate jumped onto the list in 10th place. China Overseas Land & Investment, China Merchants Shekou Industrial Zone Holdings, and Country Garden Holdings were reshuffled slightly but remained among the top 10 in 2022.

Debt-strapped R&F’s income slump was driven in part by the Guangzhou-based developer’s efforts to reduce its liabilities by selling off assets, including office blocks, hotels, and logistics parks. The company generated more than RMB 20 billion from asset sales over two years, according to an account by Yicai Global last November.

R&F’s rental income from investment properties dropped by nearly a quarter to RMB 409 million in the first half of 2022 compared to the same period of 2021, while the developer’s hotel revenues fell 29 percent in the first half to RMB 1.78 billion, as COVID-related lockdowns and travel restrictions cut into bookings.

Tougher climate

China’s top developers performed well despite a difficult year for mainland real estate, as the country faced slowing economic growth and repeated coronavirus crackdowns, including a months-long lockdown of Shanghai in the first half of the year.

Retail sales in China weakened by 0.2 percent in 2022, mainly due to the impact of COVID-19, while online retail sales grew 4 percent, according to official figures. Property brokerage CBRE found that net retail space absorption across the mainland was down 64 percent year-over-year in the third quarter, while shopping mall rents declined 0.7 percent compared to the third quarter of 2021.

In the office market, net absorption across 18 major cities totalled 550,000 square metres (5.9 million square feet) in the third quarter, down 73 percent year-over-year, while rents fell 1.2 percent in the same period. Overall nationwide office vacancy rose to 22.3 percent in the third quarter, CBRE reported.