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Under the background of pressure to "destock" commercial and office projects, some cities have broken the ice of "commercial to residential". Cases of "commercial to residential" have appeared in the land market of cities such as Haikou, Shanghai, and Shenzhen, and the value of the land has risen accordingly. On July 16, the results of the solicitation of conceptual design plans for the A0702 plot in the core coastal area of ​​Haikou Bay, Hainan Province were released, and the pace of its listing is getting closer and closer. In addition, Changsha, a hot second-tier city, allows apartments that are difficult to "destock" to be converted into residential buildings. Datong, Shanxi, and Wanning, Hainan, have also implemented policies of "commercial to residential" and deemed residential treatment to resolve non-residential inventory.

Due to major changes in the supply and demand relationship in the real estate market, sales of commercial housing, especially commercial and office projects, have continued to decline and inventory has remained high. Against this background, the measures to strictly prohibit "commercial to residential" since 2017 have been relaxed in some cities. However, in the view of industry insiders, it is difficult to convert existing non-residential properties into residential properties, and the possibility of large-scale adjustment of "commercial to residential" is not high.

“Commercial to residential” land market is frequently seen

Recently, the land market in some cities has seen the phenomenon of "commercial to residential". On July 16, there was new news about the A0702 plot in the core coastal area of ​​Haikou Bay, which has attracted much attention. On the same day, the Haikou Municipal Natural Resources and Planning Bureau announced the results of the conceptual design proposal solicitation for the plot. On July 8, Haikou began to start the control plan revision work for the plot.

According to the previous A0702 plot planning modification announcement, the land use of the plot was adjusted from the original hotel land to a second-class urban residential/commercial/urban community service facilities mixed land. After the modification, the residential building volume accounted for 85%, and the commercial and supporting facilities building volume accounted for 15%.

It is worth noting that the A0702 plot in the core coastal area of ​​Haikou Bay also appears in Haikou's 2024 residential supply plan. The industry expects that it will be officially launched on the market soon, and it will surely become a hot spot in Haikou's land market.

In addition, on July 5, in the announcement of the fourth batch of residential land transfer in Shanghai in 2024, the original Xiaomi plot (xh128D-07 plot in Xietu Street, Xuhui District) reappeared as residential land with a transfer area of ​​1.67 hectares and a floor area ratio of 2.2. It is planned to be transferred in a combination of bidding and auction.

The land was won by a wholly-owned subsidiary of Xiaomi in 2021. At that time, it was used as commercial office land with a transaction price of 1.55 billion yuan, equivalent to a floor price of 31,001 yuan per square meter. After the government's purchase and storage, it was put back on the shelves and adjusted to residential land. The starting price of the land was 3.696 billion yuan, and the starting floor price was about 100,800 yuan per square meter. In fact, in Shanghai, plots with floor prices exceeding 100,000 yuan per square meter are rare. After the land was "converted from commercial to residential", its value rose.

In addition, there are also cases of "commercial conversion to residential" in Shenzhen and Hangzhou. For example, on July 7, the Nanshan Management Bureau of the Shenzhen Municipal Planning and Natural Resources Bureau issued a notice that in order to increase the supply of residential land and promote the balance between work and residence in the Houhai area, it plans to adjust the development control units DU10 and DU13 of the statutory plan of the "Houhai Bay-Dongjiaotou area" to "commercial service land + second-class residential land". Previously, these two plots of land were for commercial service facilities.

Changsha supports real estate developers to convert unsold apartments into residential buildings

It is worth noting that on July 2, the Changsha Natural Resources and Planning Bureau and the Municipal Housing and Urban-Rural Development Bureau jointly issued the "Notice on Supporting the Adjustment of Apartments and Other Residential Commercial Housing to Residential Housing" which attracted widespread attention in the square. In order to accelerate the destocking of existing apartments and other residential commercial housing, Changsha clearly supports the adjustment of qualified apartments to residential housing to alleviate the high inventory pressure of commercial office (apartment) projects.

Changsha has made it clear that it will suspend the planning and approval of new residential projects such as apartments; for apartments and other residential commercial housing that have completed the project master plan approval but have difficulty in developing and "selling", they can be adjusted to residential properties according to procedures after demonstration, provided that the carrying capacity of public service facilities and basic supporting facilities is ensured; small apartments that cannot meet the design requirements of suite housing shall not be adjusted.

Previously, there have been cases of "commercial to residential" in Changsha, including the planning adjustment of "commercial to residential" for the two projects of Changfang Xingcheng Tiandi and Longhu Chunjiang Licheng. In December 2023, the Changsha Natural Resources and Planning Bureau issued a notice of the change of the general plan of the Longhu Chunjiang Licheng project, in which Building 20# was adjusted from the original apartment to a residential building. On May 9 this year, the Changsha Natural Resources and Planning Bureau issued a pre-approval notice for the Xingcheng Tiandi project. According to the content of the notice, Building B# of the Xingcheng Tiandi project was changed from a serviced apartment to a residential building.

"Quasi-residential" usually refers to the fact that under the residential purchase restriction policy, some commercial service projects are designed to be sold in a form similar to residential, such as serviced apartments and apartment-style offices. Previously, this practice was also called "commercial to residential". In fact, the introduction of the "commercial to residential" policy is mainly to alleviate the inventory pressure of commercial and office properties, especially apartments. According to statistics from the Hunan Zhongyuan Research Institute, as of May this year, the inventory of commercial apartments in the five inner districts of Changsha reached 1.35 million square meters, with a sales cycle of 58 months, and the overall inventory is overstocked.

Regarding Changsha's move, Yan Yuejin, research director of E-House Research Institute, believes that one of the prerequisites for this type of "commercial to residential" is that the real estate developers have unsold residential properties, rather than second-hand residential properties currently held by the owners. In other words, this is mainly done from the perspective of real estate developers to reduce inventory.

In addition to Changsha, some other cities are also implementing policies related to "commercial to residential". In June, according to the official website of the Datong Municipal Government of Shanxi Province, Datong issued the "Plan on Accelerating the Reduction of Non-Residential Commercial Housing Inventory". Among the many measures to reduce inventory, the most concerned one is that non-residential commercial housing land that has been transferred but not yet developed and constructed is allowed to be transformed for state-supported projects in accordance with regulations. With approval, it can be modified according to the planning of "commercial to residential", and the commercial-residential ratio can be appropriately reduced. At the same time, in order to revitalize the stock of non-residential commercial housing resources, completed but unsold non-residential commercial housing projects can be used as high-level talent apartments, "maker spaces" or other public service facilities through acquisition, long-term rental, etc.

In addition, at the end of June, Wanning City, Hainan Province issued the "Work Plan to Promote the Destocking of Commercial and Office-type Commercial Housing". Unlike the above-mentioned cities, in order to accelerate the destocking, it proposed that commercial and office-type commercial housing be managed in accordance with residential management and enjoy the same treatment as residential housing, such as children in the family going to school nearby, and the same water, electricity, and gas charges as residential housing.

Industry: Large-scale adjustment of "commercial to residential" is unlikely

As early as 2017, after Beijing introduced a regulation policy for commercial and office projects, first-tier cities such as Shanghai, Guangzhou, Shenzhen, Chengdu, and some hot second-tier cities followed suit and strictly prohibited "commercial to residential". However, in recent years, due to major changes in the supply and demand relationship in the real estate market, commercial housing sales have continued to decline and inventory has been high. On April 30 this year, the Central Political Bureau meeting proposed for the first time in its real estate-related statements that it is necessary to "coordinate the study of policy measures to digest existing real estate and optimize incremental housing."

With the high inventory of commercial and office projects, some cities have broken the ice in "commercial to residential conversion".

In this regard, Li Yujia, chief researcher of the Housing Policy Research Center of Guangdong Provincial Urban Planning Institute, said that recently, hot cities including Shanghai, Hangzhou, Shenzhen, Changsha, Kunming and other hot cities have successively issued policies to "convert commercial and office buildings to residential buildings", either converting the land to be supplied from commercial and office buildings to commercial and residential buildings, or converting the commercial properties that have been built or are under construction to residential buildings. This is mainly because the oversupply of commercial and office buildings has been prominent in recent years, and the sales cycle is generally as high as 30 months or several years. Developers have offered large-scale discounts and promotions, which has worsened the investment environment and is not conducive to developers recovering funds and easing the tension in the capital chain.

Li Yujia believes that in order to meet residents' housing expectations, build "good houses" and improve the quality of living, it is necessary to increase the supply of residential land; at the same time, instead of converting all commercial and office land into residential areas, part of it should be converted into public facilities such as schools and green spaces. This will help balance the demand for public facilities on residential land.

"The adjustment of commercial land to residential functions needs to consider the area planning positioning, meet the requirements of national land space planning, meet the housing land supply indicators, and consider whether the public supporting facilities required by the residential project can be implemented, and it involves fire safety and public service facilities. Therefore, it is more difficult to adjust the existing non-residential properties to residential properties." Li Yujia believes that although some plots may be adjusted, due to the restrictions of area planning control and national land space planning, as well as the requirements of local investment promotion and industry introduction, and the requirements of public supporting facilities, the possibility of large-scale adjustment of "commercial to residential" is not high.

Beijing News reporter Yuan Xiuli

Edited by Yang Juanjuan and proofread by Zhao Lin