What is the ultimate answer for real estate companies to survive through cycles?

Introduction: Compared to the scale-driven old myths, new models capable of traversing cycles are the true trump card for real estate companies to survive.

When an industry enters a downward cycle, there are no shortcuts, only deep cultivation.

The real estate industry is experiencing not a cyclical adjustment but a structural reorganization. In recent years, the days of real estate companies have not improved; the sales performance of the top 100 companies continues to decline, and debt and extension negotiations remain high-frequency terms in the real estate circle.

The traditional “high debt, high leverage, high turnover” development model has long ended, and the differentiation among companies is becoming more severe. As 2026 marks the beginning of the “14th Five-Year Plan,” “accelerating the construction of a new development model for real estate” is not just policy rhetoric but a matter of life and death for all real estate companies.

Most real estate companies are still in difficulty

Faced with drastic industry cycle changes, real estate companies are transforming and exploring. But from the results, most are still stuck in the traditional development path:

1. Business structure has not fundamentally changed. They still rely mainly on real estate development with a heavy asset model, with non-development income accounting for less than 10%, and their business deeply tied to the real estate cycle. They have not formed their own profit model, a single business structure overly dependent on a strong cycle, making the overall risk resistance weak, and vulnerable during industry fluctuations.

2. Financial pressure remains high, and holes cannot be plugged. During expansion, they were too aggressive, holding high-cost land reserves, needing to accelerate destocking and asset transfers to “slim down,” but currently in a downturn, they cannot sell or shed assets, often facing insolvency. There are limited high-quality assets available for commercial mortgage loans, and debt structures continue to worsen, making recovery difficult. The old routine of “borrowing new to repay old” is like drinking poison to quench thirst—financial holes grow larger, and liquidity crises hang like the Sword of Damocles.

3. Lack of long-term planning; ad hoc measures won’t work. Holding-type operational businesses require long-term capital investment and capability cultivation, but most companies did not make forward-looking arrangements early on. When the industry was good, they were unprepared; during downturns, they lack funds and time. It’s extremely difficult to complete business cultivation. The industry’s “panic measures” and “paying tuition” are common; without long-term capital input, professional talent reserves, capability building, and operational experience, most companies’ business transformations end in vain.

See how global benchmarks do it

Looking globally, mature real estate development models, after multiple economic cycles of iteration, like sand through a sieve, have produced a group of benchmark companies capable of sustainable and steady development. Their common logic is “breaking free from development logic, building a long-term operation model,” which also provides a reference for domestic companies’ transformation.

U.S. Simon Property Group:

As the largest commercial real estate operator in the U.S., Simon got it right from the start. Early on, it went public as a REIT. Through REITs, Simon transformed from a pure developer into a “fund + property management” hybrid, enabling quick capital turnover and recycling. After 2010, Simon slowed its M&A pace, focusing on increasing holdings of existing managed assets and acquiring high-yield core assets. The strategic focus shifted from “volume breakthrough” to “quality improvement,” through secondary renovations of existing properties and introducing new formats to boost occupancy and asset returns, relying on rent income.

Its rental income from owned properties often accounts for over 90% of total revenue. Even during multiple U.S. recessions, it maintained steady growth, revealing that the core of commercial real estate is not construction but continuous value creation and meticulous management.

Singapore CapitaLand: “Fund + Asset Management” Closed-Loop Model

CapitaLand is a model of transformation among Asian real estate companies, balancing the roles of developer, operator, and asset manager. Its “fund + asset management” model, simply put, is about earning profits and maintaining stable cash flow simultaneously, achieving efficient asset management and maximized returns. Development assets: a 2:8 self-held to developed asset ratio, with development for excess returns and owned properties providing stable cash flow, even in downturns, ensuring continuous growth.

Japan Mitsui Fudosan: A balanced full-chain layout

After experiencing huge losses and asset shrinkage following the burst of Japan’s real estate bubble in the 1990s, Mitsui Fudosan suffered significant setbacks. It then thoroughly changed its reliance on land appreciation for profit, shifting to an “development + holding + management” ecosystem.

On one hand, Mitsui Fudosan strengthened its leasing business; on the other, it developed management services as a new profit driver. In leasing, the company focused on projects that help stabilize income, emphasizing prime locations, and enhancing leasing through new or rebuilt properties. For management, as a key to transforming from a “real estate developer” to a “real estate solutions and service provider,” the company expanded its managed assets and rapidly grew income from brokerage, sales, and consulting services.

In summary, the century-long development of mature global real estate markets has revealed a common paradigm for companies to survive multiple economic cycles: the key to cycle traversal is to break free from reliance on development and sales, and to build a sustainable development model centered on operational cash flow, financial security, and long-term value creation.

Against the backdrop of overall industry transformation obstacles, there are pioneers. Longfor is one example; it started early, with firm strategic resolve and diversified business structures, becoming one of the few companies successfully implementing new models in the industry.

Longfor: A rare clear-headed player in the industry

Longfor Group, through a three-dimensional layout of “stabilizing the fundamentals, strengthening growth, and breaking through innovation,” has built a healthy development model of “low debt, strong cash flow, and sustainable growth,” which now appears to be the right move.

Anchoring on financial security and solidifying operational bottom lines are the first survival rules of mature international real estate companies and key to new real estate models. Under the widespread liquidity pressure in the industry, controlling project operational cash flow to match investment and receivables cycles; reasonably arranging short- and long-term debt maturities; continuously optimizing debt structure and reducing financing costs are the core thresholds for companies to survive cycles.

In 2025, Longfor repaid a total of 22 billion yuan of various debts as scheduled or early, smoothly passing the debt peak; by year-end, interest-bearing debt was 152.81 billion yuan, down 23.51 billion yuan from the previous year, with debt structure indicators in the industry’s best range, even better than some top state-owned enterprises.

Meanwhile, Longfor replaced high-cost short-term financing with low-cost, long-term operational property loans, creating a virtuous cycle of “dual reduction” in debt scale and financing costs, providing a replicable approach for industry debt management.

Over a decade ago, Longfor proactively laid out its operation and service businesses, setting a limit of 10% of annual sales receivables for investment in held properties. This determination is rare. Now, its operation and service businesses contribute stable income and profits, becoming a vital engine for ensuring liquidity safety and high-quality growth.

By the end of 2025, Longfor’s commercial operations covered 25 cities with 99 malls; its asset management platform spans “residential, office, entertainment, medical, elderly care” scenarios and formats, with the long-term rental apartment brand Gongyu maintaining industry-leading profitability. This also aligns with national policies promoting both rental and purchase.

More notably, Longfor’s service business has detached from reliance on parent company development projects, forming an independent market-driven “blood-making” capability. In 2025, Longfor’s service revenue reached 12.58 billion yuan, managing over 2,100 projects; its smart construction business accumulated over 38 million square meters of agency construction projects, achieving integrated “build, operate, service” capabilities with a light-asset model. This transformation is solid and tangible.

Thus, the Longfor example is one of the few clear practitioners in the domestic real estate industry’s transformation.

There are no shortcuts in the second half of real estate; only deep cultivation

The core of the new development model for real estate is shifting from “scale-driven” to “value-driven,” which has been the core secret of internationally mature benchmark companies for nearly a century. The real estate market has entered the “quality era” in its second half. What we are experiencing now is not a simple cyclical adjustment but a structural reorganization.

The deep logic of industry transformation is to shed the short-term “high turnover” growth model and build a new growth function deeply integrated with service and operation. The golden age of pursuing scale expansion, rapid development-sales-collection, and high turnover is gone forever.

In the future, competition in real estate will no longer be a simple contest of market share or sales figures but a comprehensive contest of operational capacity, service ability, and cycle resistance. The second half of real estate has no universal shortcuts; only cultivating value deeply can lead to sustainable success.