(Yicai Global) Feb. 25 -- China’s emerging field of real estate project management is growing fast at a time when the nation’s developers are struggling under a mountain of debt.

“The entire market is expanding at an accelerated pace,” an official at a project manager told Yicai Global. “The market’s current average annual growth rate is over 20 percent. We have received more orders than we can complete.”

Real estate project managers have lower costs and face fewer risks than developers, which need to secure the rights to build on land. Stressed Chinese builders, hobbled by debt defaults since last year, have resorted to such third parties to finish ongoing projects.

“We’ve had our hands full since the second half of last year,” said another official at a leading project management firm. “Business is expanding so fast that the company will have to recruit on a large scale.”

Just two such companies are listed in China. The shares of Greentown Management Holdings [HKG: 9979] have surged nearly 70 percent in the past six months. Last year, the Hangzhou-based company penned new deals involving almost 22.8 million square meters, up 22 percent from 2020, with an estimated revenue of CNY7.1 billion (USD1.12 billion).

The stock market performance of its peer, Zhengzhou-based Central China Management, has lagged Greentown, however, with its shares [HKG: 9982] falling almost 40 percent over the last six months.

Asset Light

The indications are that China’s property sector is heading toward a more asset-light business model. It is inevitable that the country’s developers shift to becoming service providers, according to a source at a project management firm. They need to get used to being Party B instead of Party A, the person added.

Another industry source said he expects more developers to spin off their own project management units to meet rising demand and maximize the business. Gemdale Property Management, a unit of Shenzhen-based Gemdale Group, is likely to be the next to apply for an initial public offering, the source said.

What is bad news for developers is actually good news for project managers, according to one source. Debt issues have forced many private developers to quit the land market, leaving state-owned builders and local government-owned investment firms with limited construction capacity as the most active players. That should send more business in the direction of reliable project managers, she said. More than 40 percent of her company's clients are state owned.

Developers’s debt woes could also lead to such companies picking up business to finish off uncompleted projects, she added, as the government wants property units  delivered to buyers as soon as possible.

Regional governments may also become major clients, as more low-cost housing projects are planned. “Governments definitely seek project management companies for the completion of large affordable housing projects, which means important opportunities for the industry,” the same source said.

Editor: Emmi Laine