Dispatches from China: The logistics of opening an office in China by Dan Scarrow


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Dispatches-from-China
I’m now in month 2 of a 4-month long assignment looking into the logistics of opening a Macdonald Realty representative office in China.

To recap, we have gone to China as a response to demand from our clients. We determined early on that we’re likely the only brokerage in BC that’s capable of supporting an economically feasible office in China due to our multiple lines of business: Residential Brokerage, Commercial Sales, Project Marketing for Developers, Property Management and Mortgage Financing. Having one or two of these capabilities would not be enough to sustain an office in China, but having all 4 means that Macdonald Realty and its affiliated companies – Macdonald Commercial, Property Management, and Platinum Project Marketing – can make it work.

In the first month after our arrival, the unexpected changes to the Canadian Investor Immigrant Program had a lot of people scrambling, trying to figure out what the impact would be for the Vancouver housing market. I must admit that I’ve changed my mind about how big the impact would be from Large to Minimal. The reason, as explained by some of our Immigration Consulting partners here in China, is that their wealthy clients are more interested in placing their children and a portion of their wealth outside of China than they are in immigrating themselves. Canada offers a perfect solution for this through student visas for children and an accompanying 10-year multiple entry visa for adults. These immigration consultant partners are fairly confident that many of their clients will choose this route and continue to invest in Canada and British Columbian residential and commercial real estate.

Another issue that we’ve had to deal with is representative fraud. This is something that is quite common and widespread in China and only recently has it made its way over to Canada. We have now verified 3 cases of individuals who have fraudulently claimed to be the Canadian representative of a company in China, and we have several other suspicious incidences to follow up on. The cases seem to follow the same pattern: an individual claims to be the representative of a large Chinese company, he/she knows a lot about the company or a decision-maker in the company but most of the information can be found online, and the individual tells us not to contact the decision-maker back in China because they are ‘very busy’. Through the BC Trade Office here in China, I’ve been able to get a hold of the Chairmen of several of these companies and most of them (though not all) have denied having any sort of official representation in Canada. This is just another area where having ‘boots on the ground’ can help.

Moving forward, this month’s task is to determine and solve the logistical, legal, and administrative challenges of opening an office in China. This is one of the biggest hurdles for Canadian companies and is one of the main reasons why so few have set up shop in the country.

As an aside, I recently made a side-trip to Taiwan to learn about the state of the Taipei real estate market. Much to my surprise, I found that housing prices in Taipei are much higher than in Vancouver and their wages are significantly lower. This goes to the heart of the paradox that we’ve been faced with in this business for several years now: Vancouver house prices, wages, and housing affordability. The oft-cited Demographia study is often twisted in Vancouver headlines as being a study of all markets around the world, when in actuality it only covers 9 (mostly western) countries. It explains the paradox of why Canadians often think that Vancouver is so expensive while our Chinese clients continually tell us how cheap Vancouver is. I certainly can’t explain to you how the economics of Taipei’s real estate market work, I can only tell you that they do. And if Vancouver is the most Asian city outside of Asia, it certainly lends credibility to the theory that Vancouver house prices may still have some room to grow.

Regards,

Dan Scarrow
VP Corporate Strategy
Macdonald Real Estate Group

Dispatches from China
Dan Scarrow is Vice President of Corporate Strategy at Macdonald Realty.  A second generation Chinese Canadian with fluency in Mandarin, Dan will be spending several months in Shanghai investigating the opportunity to open a Macdonald Realty rep office in China.  Dan will be sending monthly dispatches with stories from his experiences in Shanghai.

Based in Vancouver, British Columbia, Macdonald Realty has 20 offices and 1,000 staff and Realtors, and offers a full range of real estate services across the province, including residential and commercial brokerage, property and strata management, and project marketing.

For more information contact Macdonald Realty at 1-877-278-3888

Dispatches from China by Dan Scarrow


Dispatches-from-China
Greetings from China.

As explained in the Globe and Mail, I have been in Shanghai for nearly a month to explore the feasibility of opening a Macdonald Realty rep office in China. For the past few years, we have received consistent feedback from our clients asking us how they can access the Chinese market. This is our response to customer demand. Our firm has a large residential presence, along with a separate property management and commercial brokerage division, and a project marketing division so our office in China would look for investors in all three areas: residential resale, commercial properties, and new home construction. We’ve received considerable feedback from homeowners, commercial property owners, and developers who all wish to market their properties in China to Chinese buyers.

I believe we are uniquely positioned to attract investment back to BC because of:

  1. Our focus on this province
  2. The fact that we are BC’s only truly full service corporate real estate company
  3. Our knowledge of the Chinese market

Because our focus is on British Columbia, the goal of our Chinese rep office is to encourage investment back into British Columbia so our clients can be assured that they receive the widest exposure to potential buyers, be it residential, commercial, business, or new construction. Some of Vancouver commercial firms have licenced affiliations with Chinese offices, but the focus of those offices is on building business for China, not Western Canada.

A Chinese rep office is only viable because we are a truly full service corporate real estate company. A few larger local developers have some presence in China, but their focus has been solely their own projects and the results have been decidedly mixed. Our hope is that by combining all of our lines-of-business we will be able to provide the one-stop-shop for investors to look into all British Columbia real estate.

Finally, Macdonald Realty and its affiliated companies have an unparalleled knowledge of the Chinese market. Our owner, President and CEO Lynn Hsu is a first-generation Chinese Canadian who has already accrued a hefty list of Canadian business accolades. I was sent back to China to explore the possibility of an office because of my relative fluency in Mandarin and my cultural understanding from growing up in a mixed Chinese-Canadian household. As a company, we’ve been very successful at luring investment into BC from top Chinese companies and businesspeople, partly because a number of our company’s key staff have in-depth knowledge of BC real estate products and who can speak comfortably to these investors in their own language.

On a more personal note, China has been every bit as interesting as I thought it would be. I’ve been in Shanghai for most of the time I’ve been here, but I expect to go to a few secondary and tertiary cities in the near future (Beijing, Guangzhou, Chongqing, Hangzhou, and Qingdao are on my to-do list). The pollution has been noticeable, but not terrible so far. I’ve heard reports that recently Beijing and other northern cities have experienced terrible smog, but I haven’t been restricted in my movements thus far. That said, you can definitely see the difference between an Air Quality Index 50 day vs. 250 day:


Shanghai_smog_photo
For those who have never been, Shanghai is an extraordinary place that is relatively friendly to tourists. It’s transportation system is incredible, with the Metro alone moving 2.5 billion people annually. Rush hour is a sight to behold, both due to the sheer number of people moving through the system as well as how efficiently it does so. While the city is enormous, the main downtown area is quite manageable. I liken it to New York City: if you ever wanted to explore the whole metro area, it would take you forever, but Manhattan can be understood in only a few days. Same thing with Shanghai. A word of caution though, this area of Shanghai is not at all representative of China. As one expat told me: “Living is Shanghai is really fun, but if we were living in any other city in China, we wouldn’t last very long.”

I suppose that’s why they all want to come to Canada.

My plan is to be in China until the end of May, and I look forward to giving you updates of our progress.

Regards,

Dan Scarrow
VP Corporate Strategy
Macdonald Realty

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Dispatches from China
Dan Scarrow is Vice President of Corporate Strategy at Macdonald Realty.  A second generation Chinese Canadian with fluency in Mandarin, Dan will be spending several months in Shanghai investigating the opportunity to open a Macdonald Realty rep office in China.  Dan will be sending monthly dispatches with stories from his experiences in Shanghai.

Based in Vancouver, British Columbia, Macdonald Realty has 20 offices and 1,000 staff and Realtors, and offers a full range of real estate services across the province, including residential and commercial brokerage, property and strata management, and project marketing.

For more information contact Macdonald Realty at 1-877-278-3888