You have as many opportunities in China as there are places: CapitaLand China Trust's CEO

Even at this pivotal and volatile moment in the world economy, when geopolitics have thrown trade relationships into doubt, China remains a good bet in the long term, says Gerry Chan, chief executive officer of the manager of CLCT. The China-focused real estate investment trust owns and manages 18 assets, primarily retail properties across China, with a portfolio valued at around S$4.4 billion.

For example, while the United States has imposed high tariffs on imports from China, the latter still holds many advantages for businesses. These include the vast size of its market and extent of its supply chains. Chan highlights: “You can save costs by reaping economies of scale, and businesses in China are highly adept at cost efficiency.” From CLCT’s perspective, the impact of tariffs on operations has been limited. “Our malls primarily cater to China’s middle-income consumers, and our tenants have minimal reliance on US-imported products,” Chan notes. While US tariffs have added volatility to capital markets, their direct, first-order impact on CLCT’s operations remains minimal.”

In fact, traffic in CLCT’s nine malls in the nation – which account for 76.4 per cent of its Assets under Management (AUM) as at 31 December 2024 – has risen year after year, including by 8.7 per cent last year. “What that tells me, which is what I see on the ground too, is that people in China are still going to malls to socialise and for leisure.”

“They are also travelling less outside of their country, with outbound travel reaching just about 80 per cent of pre-Covid-19 pandemic levels for the first three quarters of last year. This means that they are spending more time in their own country, perhaps shopping in their own neighbourhood or region, or going on trips within the country,” Chan points out. 

“What all the trends translate to is that we can get high occupancy rates for our assets, but to achieve very high rent reversion is a bit more challenging, as market conditions continue to favour tenants.” CLCT has devised strategies, both at the portfolio level and for individual assets, to address this and capitalise on a range of opportunities. 

In addition to investing in tier-1 cities—where residents typically have higher spending power and rents have shown strong, stable growth over time—CLCT also has exposure in non-tier-1 cities. “The growth rates in these non-tier-1 cities may be quite high as their markets are less saturated. Our mall in Hohhot, Inner Mongolia, CapitaMall Nuohemule, for instance, has been performing very well.”

The right tenants, treated right

Aligning the tenant mix with changing consumer preferences is key to driving footfall and spending. In response to the Chinese government’s stimulus efforts—such as the issuance of consumption vouchers aimed at boosting domestic spending—CLCT observed a notable uptick in IT product purchases, which are eligible under the voucher scheme. “There’s a wide variety of IT products, and unlike bigger-ticket white goods such as refrigerators, consumers frequently upgrade items such as mobile phones.”

Leveraging its Sponsor’s (CapitaLand Investment) strong tenant base, CLCT continuously monitors retail trends to proactively refresh its tenant mix and optimise asset performance. It strategically unlocks value by transforming underperforming anchor supermarket spaces into higher-yielding areas. It recently transitioned an older-format anchor supermarket at CapitaMall Wangjing, a popular suburban mall in Beijing’s Wangjing residential enclave, into a new-concept supermarket complemented by popular retail brands and food and beverage outlets, to improve the shopping experience. 

Although CLCT’s five business parks, which make up 17.0 per cent of its AUM, face a tough environment – fewer multinational companies are setting up shop in China amid the country’s decelerating economy – it has several crucial strengths. “We maintain ongoing communication with Chinese government officials and provide regular feedback, enabling them to support us more effectively where feasible,” Chan says.

“At the same time, the larger CapitaLand team has a presence in many different markets. We are constantly sharing the pool of overseas tenants that may want to go into China, and those in China that may want to venture abroad. We can lend a hand to make it happen. Our tenants appreciate this, and it has played a role in us retaining some of them.”

An emerging trajectory among China’s young entrepreneurs offers an intriguing opening too. “We’re seeing these entrepreneurs start with an office space. As their products gain traction, they look to open showrooms where fans can experience their offerings firsthand. Eventually, many begin exploring retail spaces to experience with new retail concepts.”

Since CLCT has both business parks and retail properties, it can accompany the entrepreneurs on this journey. “We’re pitching that they should stick with us as we can do the whole end-to-end relationship.” Its latest diversification into logistics parks, that currently constitute 6.6 per cent of its AUM, can further support these and other businesses.

Taking the long view 

Apart from seizing the moment, CLCT analyses other segments that it could add to its portfolio to bolster its growth. Chan shares: “We evaluate the fundamental demand drivers of each asset class, to ask: Will it survive and thrive through different cycles and situations? We want to pick segments that are resilient and capture China’s long-term growth drivers.”

Accommodation, specifically rental lodging, and data centres are two promising possibilities. “In China’s urban centres, especially in the tier-1 cities, you have an ongoing influx of people who want to rent as they are just there for jobs. They have no intention of buying a home until much later. I believe this is something that will become further entrenched.”

Demand for data centres is also likely to surge as China seeks to dominate the race in artificial intelligence (AI), particularly after Chinese AI start-up DeepSeek garnered global attention for its open-source large language model. “Of course, data centres are big, chunky investments, so we have to see if we have the ability to take on such high beta, high concentration risks.”

Chan notes that his decades-long career has given him a wide perspective. Before he became CLCT’s chief executive officer in January this year, he spent nearly 15 years handling an array of diverse responsibilities in CapitaLand. His jurisdictions spanned Singapore, Malaysia, the United States, Europe, Australia and other major markets. 

“All the experience that I’ve had looking at the international market has helped me to form a view of our long-term needs, both on the demand side as well as the capital market side, for China, what would be good for us to have in our portfolio.” he says. 

Part of China’s attractiveness is its complexity and variety. He underlines: “China is huge. Each city, sub-region that I’ve gone to has its own characteristics, ways of doing things, industries. The culture is different. What that means is that you can’t treat it as a homogenous country – and that you have as many opportunities in China as there are places.”

About Capitaland China Trust

CapitaLand China Trust (CLCT) is Singapore’s largest China focused real estate investment trust (REIT). Listed on the Singapore Exchange Securities Trading Limited (SGX-ST) on 8 December 2006, the objective of CLCT is to invest on a long-term basis, in a diversified portfolio of income producing real estate and real estate-related assets in China, Hong Kong SAR and Macau that are used primarily for retail, office and industrial purposes (including business parks, logistics facilities, data centres and integrated developments). CLCT is managed by CapitaLand China Trust Management Limited (CLCTML), a wholly owned subsidiary of Singapore listed CapitaLand Investment Limited (CLI), which is a leading global real asset manager with a strong Asia foothold.

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About kopi-C: the Company brew

kopi-C is a regular column by SGX Research in collaboration with Beansprout that features C-level executives of leading companies listed on SGX. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.

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