Local architects, designers building lucrative business model in Far East Beijing builds a Vancouver suburb

Fast-changing Chinese government policies encourage developers to build fast, skip public bidding and cultivate connections

Vancouver architects who have persevered in navigating China’s ever-changing housing policies and know how business gets done in the People’s Republic have hit the jackpot.

Romses Architects principal Scott Romses, for example, first designed homes in China 14 years ago and has watched his Chinese business increase to 30% of company revenue thanks to several current projects.

Competing architect Paul Rosenau, who is principal of Ekistics, generates 80% of his $5 million in annual revenue from China, even though he bases 28 of his 30 staff in Vancouver.

In 2002, Beijing Capital Land (BCL) developers asked Rosenau to provide urban design and architectural advice for what was intended to be an 800-home single-family development in an exclusive area of Beijing.

Rosenau was initially surprised that a Chinese developer wanted to use Canadian consultants. He then learned that many Chinese want to live in west-side Vancouver-style homes without moving to Canada.

Rosenau designed homes made with B.C. lumber and concrete, which contained a waterproofing compound manufactured by Vancouver’s Kryton International. The result was that by 2006 roughly 333 homes were built in what resembled a Vancouver neighbourhood, BCL principal Zhaohui Wei told Business in Vancouver in December via cellphone from Beijing.

But he added that the project stalled when the Chinese government changed its housing policies to discourage building single detached homes because it decided that style of construction was not in the collective interest of the country’s more than one billion people.

In 2009, however, China allowed the Vancouver Forest project to proceed even though the government’s official policy was still to discourage single-family homes.

Wei now expects Vancouver Forest to have 800 homes by 2015. The homes are about 4,300 square feet and sell for more than $1.9 million.

Work on Vancouver Forest has been a springboard for Rosenau, who is a former Business in Vancouver Top Forty under 40 winner.

He bases area managers in Ekistics’ offices in Shanghai and Ho Chi Minh City, but all design work is done in Vancouver.

Rosenau said the Vancouver Forest project opened the doors for his company to complete master plans for more than 75 projects in 35 cities in China and Vietnam.

Ekistics’ local work includes designing the Whistler Athletes Village as well as residential resorts on golf courses such as the Rise and Predator Ridge in the Okanagan and Fairwinds on Vancouver Island.

“We never bid on contracts in China,” Rosenau said. “We get called and Chinese developers always say, ‘Can you do this by yesterday?’”

Rosenau and others who have worked in China say the business culture is very different from Canada’s.

Bidding on contracts is a western concept. In China, architects win contracts based on who they know and their past success in the country.

Rosenau provides local clients an estimate for how much a job will cost and then bills by the hour. In China, he charges a flat fee that’s often far more than it would be if he were to charge by the hour. For Rosenau’s Chinese clients, the key is often to how fast the project can be completed.

Rosenau said Chinese government housing policies that change almost monthly help drive that need for speed.

Many recent changes have been aimed at heading off a real estate bubble. For example, Rosenau pointed out that years ago China had no limit on the number of mortgages a Chinese citizen or foreigner could hold in the country. Landowners were then grandfathered when the official policy limited homeowners to a maximum of two mortgaged properties.

China then reduced that threshold to one mortgaged property and, finally, to title for one property, said Rosenau, who has owned and sold property in Shanghai.

Today, even if a property owner could buy a second property by paying 100% of the purchase price, Rosenau said he or she would officially be unable to buy the second property.

Ironically, Rosenau is now designing the Xi Hai Lake Resort. The Chinese project is slated to have 6,000 mansion-style, lakefront homes on larger lots than at Vancouver Forest. The project demonstrates that exceptions to official policy in China remain rife and depend on who you know.

“Homes like that can be built if you can convince the government that the project is tourist based,” he said. “In China, ‘tourists’ means Chinese tourists, not foreign tourists. These are going to be second homes.” •

North American single-family home subdivisions started emerging in China early this century following successful projects such as Orange County, which created a faux Los Angeles an hour’s drive from Beijing.

Beijing Capital Land (BLC) developers decided to build a subdivision that resembled a neighbourhood in Metro Vancouver and approached Canada Mortgage and Housing Corp. (CMHC) to provide introductions to principals at companies that could provide the products and services needed to create Vancouver Forest.

The project initially used 17 Canadian companies and was intended to showcase Canadian housing technology, materials and expertise, CMHC senior trade consultant Elizabeth Tang told Business in Vancouver.

Some of the other B.C. companies involved in Vancouver Forest were Canfor Corp. (TSX:CFP) and Weldwood of Canada.

“This was one of the first wood-frame construction projects in China,” Tang said. “It started before the Chinese building codes for wood-frame construction were in place.”

BCL built 17 wood-frame show homes using B.C. softwood lumber and oriented strand board. Six Canadians worked on the homes and trained local labourers, said BCL project manager Zhaohui Wei.

Construction switched to concrete to reduce construction costs, although wood was still used on roofs until 2006. Wei said recent homes have steel roofs made with help from a Calgary company.

Most homes are about 4,300 square feet, but Wei said a 15,000-square-foot “king house” is planned for the middle of a large field and will be priced at about $9.6 million.

Sales have been brisk. BCL averaged selling between six and eight houses per month throughout 2010 and 2011, which Wei said made the project more successful than any other Beijing villa development. •