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GTC targets smaller tier cities

By Bao Wanxian (China Daily)
Updated: 2009-02-09 08:02

While a strong wait-and-see attitude was common in China's real estate sector, in mid-January a large-scale shopping mall began construction in Chengdu, capital city of Sichuan province that was severely hit by an earthquake in May last year.

With a total 650 million yuan in investment, GTC real estate China, the investor in the mall project and a subsidiary of Netherlands-based GTC RE Holding, is working with the China Academy of Building Research to build a traditional European-style shopping mall in Chengdu's new economic development district, less than 15 minutes drive to the city's Shuangliu International Airport.

Upon completion by early next year, the Galleria Shopping Mall will be formed as the city's largest high-end retailing center, said Shi Liang, deputy director of the Ministry of Commerce of Chengdu city, adding GTC's action would greatly drive the city's business atmosphere during the current recession.

Since entering China in 2005, GTC China has developed and operated seven residential and commercial properties with the strategic focus on the country's eight and third-tier cities, such as Shenyang in Liaoning province, Changzhou in Jiangsu province.

"Till now, amid the storm of economic turmoil, we also insist on our bright belief about the country's market potential in real estate sector," said Dror Poleg, marketing director of GTC Real Estate China.

To support his confidence, Poleg cited some figures. Early this year, GTC China won an auction to acquire a land plot of approximately 63,300 sqm in Dalian, the coastal city in northeast China's Liaoning province. With a total investment of over 3.5 billion yuan, the company announced it would build a mixed-use commercial center along Dalian's port.

"The current business downturn posed a challenge to us, but we still want to grasp all opportunities and continuously drive our success in China's second and third-tier cities," Poleg told China Business Weekly during a recent interview.

Currently, "our decision (of investing in second and third-tier cities) has been proven right," Poleg said.

And prior to GTC's project, the growing retail atmosphere in Chengdu already includes some world-leading retailers such as IKEA, Decathlon and Fusen-Noblehouse.

The competition will perform as the biggest drivers of regional consumption volume, Shi added.

GTC's way

More noticeable, after a three-year development in China's real estate market, the Chengdu project was also a significant turning point for GTC, changing its business focus from developing residential buildings to commercial buildings.

Poleg said it was huge surprise to the public when GTC came to China and announced its first project in local market - developing a residential building project in Shenyang, capital city of northeast China's Liaoning province.

"Besides the location in once-obscure Shenyang city, as a leader of operating commercial buildings in most European countries, we also surprised others by operating a residential project," Poleg said.

The most important thing, was to find an effective way for maintaining a healthy cash flow, he said.

"Usually, residential building is easier than commercial building to speed up the flow of operating capital. And through residential buildings, we can bring in more value and modern living culture to China," Poleg said.

A geographic strategy has also been key in GTC's residential development success in the last three years. All the developments have been located near modern transit systems.