China Securities Co., Ltd.: Commercial real estate enters a stage of stock-based quality improvement; high-quality commercial real estate companies may be the first to benefit.

China Securities Co., Ltd. released a research report stating that on October 30, the NDRC and four other departments jointly issued the "Guiding Opinions on Strengthening the Construction of Consumption Infrastructure and Promoting Benign Interaction Between Consumption and Investment," supporting the construction of consumption infrastructure across six areas: renovation, services, mobility, circulation, green and digitalization, and safeguards. Commercial real estate is currently entering a stage of stock-based quality improvement, and the industry may diverge in the future. Branded asset-light operators, and commercial real estate companies with ample capital, low financing costs, and well-located held projects may be the first to benefit. The "Opinions" expand the positioning of REITs into a composite mechanism that combines market-based exit with operational standardization constraints, and the market space for consumption infrastructure and commercial real estate REITs is expected to further open up in the future. China Securities Co., Ltd.'s main viewpoints are as follows: On October 30, the NDRC and four other departments jointly issued the "Guiding Opinions on Strengthening the Construction of Consumption Infrastructure and Promoting Benign Interaction Between Consumption and Investment" (hereinafter referred to as the "Opinions"), setting out twenty requirements across six areas: improving urban and rural commercial facilities, upgrading service consumption facilities, optimizing mobility consumption facilities, improving the circulation facility network, advancing the construction of new-type consumption facilities, and safeguard measures. Commercial real estate has entered a stage of stock-based quality improvement. According to statistics from Winshang.com, the number of centralized commercial projects nationwide currently exceeds 9,400, with annual new openings falling from a peak of 702 to 369 last year, and 20% of which are stock renovation and reopening projects, indicating that commercial real estate has entered the stock era. For a long time, a large number of existing shopping malls and department stores have faced difficulties such as aging equipment, homogeneous business formats, and loss of foot traffic. Because renovation investment is sunk into heavy assets with long payback periods, owners lack economic incentives. The "Opinions" state "support for the renewal of equipment and facilities in offline consumption commercial venues, and promotion of integrated multi-format development of commercial blocks and other areas," indicating that policy has shifted from "building incremental supply" to "renovating stock and improving operations," and the focus of future competition in commercial real estate will gradually shift from "location and area" to "operational adjustment and renovation." The industry may diverge, with three types of commercial real estate companies benefiting first. Industry competition is gradually shifting toward operational and renovation capabilities. Against the backdrop of low consumption growth, commercial real estate performance may diverge in the future, and the following three types of commercial real estate companies may be the first to benefit: 1) branded asset-light operators, which continuously expand market share by taking over stock renovation projects on an asset-light basis; 2) companies with ample capital and low financing costs; renovation requires upfront capital expenditure, and owners with ample capital or low financing costs can launch renovations counter-cyclically and seize the window for stock renovation during a period of supply contraction; 3) companies with more core-location projects; existing shopping malls in core locations of core cities have stronger foot traffic foundations and greater elasticity for rent recovery. The functional positioning of the REITs market has been upgraded. Previously, the function of REITs was mainly to revitalize stock assets. The "Opinions" list REITs alongside new-type policy-based financial instruments as expandable investment channels supporting the construction of consumption infrastructure, expanding the positioning of REITs into a composite mechanism that combines market-based exit with operational standardization constraints. For owners, the existence of an exit channel in turn constrains front-end renovation and operational behavior, making "renovationoperationsecuritization" a disciplined cycle rather than a one-off asset exit. With the upgrading of the functional positioning of REITs and a large number of commercial properties entering the stock renovation stage, the market space for consumption infrastructure and commercial real estate REITs is expected to further open up. Bullish on branded shopping center operators and high-quality consumption REITs. Leading commercial real estate companies have already formed strong brand influence, accumulated considerable asset-light output practices, and gained stock renovation experience. The report is bullish on consumption infrastructure REITs with strong brand influence, strong operational management capabilities, and layouts in cities with high offline commercial value.