A "new species" has emerged in real estate

Author | Zhou Zhiyu

Editor | Wang Xiaojuan

The old era of real estate has officially come to an end, and the criteria for judging the quality of a real estate company are no longer scale, land reserves, and leverage, but rather operating cash flow, future profitability, and the growth potential of new businesses. At this time, the industry's seating arrangement needs to be re-evaluated.

With the conclusion of the mid-year performance disclosures for 2025, the results measured by this new "yardstick" have also become clear: the trend of the industry struggling to find a bottom continues, and widespread losses remain the mainstream.

Against this backdrop, the mid-year performance report released by Longfor Group at the end of August provides a distinctly different model: not only did it achieve positive profits, but the operating cash flow, including capital expenditures, also realized a net inflow of over 2 billion yuan.

The source of this resilience comes not from its traditional development business but from the structural advantages of its business portfolio, particularly the "intelligent construction business of Longfor Longzhizao, which is becoming a new driving force for growth, quietly emerging as one of the new engines of growth." The financial report shows that this business achieved revenue of 700 million yuan in the first half of the year, with a year-on-year growth rate of 65%.

This high-growth channel, characterized by a light asset service model and driven by digital technology, not only serves as a "stabilizer" for Longfor to navigate through cycles but also represents a possibility for the future of the industry: transforming from a heavy asset "developer" to a capability-driven "service provider," and using this as a fulcrum to reconstruct business models and growth logic.

It also indicates that the future of real estate lies not in simply "building houses," but in how to empower spaces through technology to provide higher value and efficiency. This may be the most authentic representation of the "new productive forces" in the real estate industry.

Light Asset Breakthrough

In the old era of the real estate industry, the core logic for developers was "resource-driven," relying on heavy asset elements such as land and capital to achieve scale expansion through the "buy land - develop - sell" model. However, as the industry enters a deep adjustment period, the simultaneous decline of land and financial dividends has exposed the fragility of this model.

The solution provided by Longfor is to transform towards "capability-driven," integrating and outputting over thirty years of accumulated experience in full-spectrum development, operational capabilities, and digital technology strength to become a light asset service brand—Longfor Longzhizao.

This is a model that is both similar to and different from traditional entrusted construction. The similarity lies in the fact that it also serves the entrusting party and does not directly bear land and major investment risks. The difference is that what Longfor Longzhizao provides is not merely simple construction management, but a comprehensive "one-stop urban construction solution" covering the entire lifecycle.

Its business matrix includes five major product services: positioning planning, virtual construction, construction management, smart decoration, and real estate space technology, essentially transforming from a simple "builder" to a "value co-creator" deeply bound to the entrusting party.

The performance in the first half of 2025 confirms the growth potential and explosive power of this new track. During the reporting period, Longfor Longzhizao achieved operating revenue of 700 million yuan, a significant year-on-year increase of 65% Its business landscape continues to expand, with 62 new construction projects and an additional construction area of 8.52 million square meters in the first half of the year, maintaining its position in the industry's top tier.

What is even more noteworthy is the change in its client structure. In the first half of the year, the construction area of new projects from Longfor's Longzhizao accounted for as much as 63.3% of central state-owned enterprises and government-related construction projects. This conveys a clear message: in today's environment of sharply declining market risk appetite, Longfor's Longzhizao has earned the trust of "anchor" clients, including local platform companies, central state-owned enterprises, and AMCs, thanks to its robust brand image, excellent product quality, and strong delivery capabilities.

This trust ultimately translates into tangible sales performance. In the first half of the year, Longfor's Longzhizao achieved sales of 8.4 billion yuan from construction projects, with several projects such as Guangzhou Central Jing Song and Zhengzhou Zhongyuan Song experiencing hot sales in the local market. This not only helped the clients achieve liquidity and value realization of their assets but also reaffirmed the market's iron law that "good products speak for themselves."

A highly representative case is the Chengdu Xijingtai project. This is a stalled project that had been suspended for 8 years, involving the interests of over 1,700 households. Longfor's Longzhizao intervened in collaboration with the client using an innovative model of "benefit bonds + construction agency."

With its strong capabilities in product optimization, cost control, and efficient operations, the project not only achieved a transition from commencement to actual opening in just 4 months but also became the regional sales champion for four consecutive months after its restructuring, ultimately helping over 1,700 creditors resolve their delivery issues.

This is not only a commercial success but also explores a new path for the industry in dealing with existing non-performing assets that benefits multiple parties.

Insights on the "New Model" in Real Estate

If Longfor's Longzhizao provides a model for real estate companies to transform towards a "lighter" approach, then the core of its success reveals two key directions for future competition in the real estate industry: technological empowerment and value reconstruction.

"AI+" and "digitalization" are among the most frequently used terms in Longfor's Longzhizao business materials. This is not just a conceptual packaging but a core capability that has been deeply integrated into the entire business process.

For example, the "5M Virtual Construction" service, composed of technologies such as BIM (Building Information Modeling) and VR (Virtual Reality), can accurately present the future spatial appearance before the project starts, allowing for modifications to design plans and decision-making to be made in advance, significantly improving efficiency and accuracy.

In the renovation project of the Jinsui Building in Lujiazui, Shanghai, this technology reduced the overall design time by 50%, with the final restoration rate exceeding 95%.

In the construction phase, the AI inspection system can automatically identify construction hazards, ensuring a high degree of uniformity in delivery standards; in the operational phase, its self-developed AI cooling station intelligent control technology can accurately predict building loads through machine learning, automatically optimizing equipment operation, achieving a significant reduction of 30% in energy consumption per unit in over 60 projects. These are no longer just auxiliary tools but the core engine driving the business, marking a solid step for the real estate industry towards "new quality productivity."

The ultimate goal of technological empowerment is to achieve comprehensive value reconstruction.

For clients, the value brought by Longfor's Longzhizao is "cost reduction and efficiency enhancement" and "value improvement." Through meticulous cost control and efficient operations, it wins excess returns for its clients For homebuyers, it is about obtaining a "good house" that is reliable in quality and as seen. As emphasized by the management of Longfor Group, "the market still lacks good houses, and the demand for improvement in core locations remains very strong."

For the entire industry, the biggest revelation from Longfor's practice of Longzhizao is that it proves the capability endowment of real estate companies can completely transcend traditional development boundaries and find a place to exert their strength in broader urban space creation and service areas.

Whether it is building the headquarters base for Ant Group, which is among the first zero-carbon buildings in the country, or "intelligently creating" headquarters apartments for Xiaomi Group, or revitalizing existing assets in the city, all of these demonstrate the enormous potential of real estate companies in their transformation into urban service providers.

As Zhao Yi, Executive Director and CFO of Longfor Group, stated, as inventory is gradually reduced, the impact of real estate development business on the group will gradually decrease, while operational and service businesses will continue to "safeguard" the group's profit growth and recovery, forming a "stabilizer."

At a turning point in the era, pessimists are often correct, but only optimists can move forward.

This mid-term report from Longfor, especially the strong growth resilience demonstrated by Longzhizao, may indicate that real estate does have a future, but the old era relying on high leverage and high turnover has ended. A new era that tests product strength, service capability, technological power, and comprehensive operational ability has just begun