Servicing a need for comfortable accommodation

Serviced apartments are gaining popularity in China as international companies grow their operations. Also, more wealthy Chinese professionals are showing an interest in the market.

"My place is in a good area. I have a regular cleaning service. I can cook if I have time and if I'm in the mood. Also there is a gym and indoor swimming pool that I can visit to relax after a busy day at work," said Jacky Wang, 38, a senior executive with a leading Chinese IT company.

He lives in a high-end serviced apartment in Shanghai for about three months every year when he has to deal with business affairs concerning the local branch.

"It is like a home from home," Wang said.

As a relatively new type of residence in China, serviced apartments are much more expensive than ordinary rentals but provide better services and amenities for daily use.

Wang's residence costs about 18,000 yuan ($2,900) a month, almost three times that of a similar-sized flat nearby. The flexible contract is a huge advantage for mobile professionals.

Moreover, people get tired of staying in hotel rooms with little personal color and renting an apartment is too complicated for just a few months, so a serviced apartment is a good option, he added.

The central government has been tightening regulations on property sales since 2010, causing a significant drop in transactions for both new and lived-in homes because most sellers want to wait until the market improves.

However, demand for high-end apartment rentals remains strong as China continues to see a huge influx of foreign-invested companies, said Jastina Balen, director of group branding and communications at Frasers Hospitality Pte Ltd.

The company plans to open more than 700 new units in 2013 and is on track to manage a total of 23 property sites in China by 2016.

"The average occupancy rate of our serviced apartments is above 80 percent in China and above 90 percent in Shanghai," said Balen.

"The China market is vital to us," she added.

As China's economy progresses ahead of most other countries, many multinationals have increased their investment in the market. The result is a continuous increase in the number of expatriates that, in turn, exacerbates the demand for premium serviced residences in Shanghai.

According to the latest report from DTZ, a leading international property consulting company, the overall occupancy rate for the expatriate lease market in Shanghai during 2012 was in excess of 90 percent, with highly sought-after estates such as Xintiandi and Green City experiencing close to full occupancy.

"Generally, the target customers for premium serviced apartments consist mainly of senior expatriates and consular staff. They are often accompanied by family members and stay for at least three months," said Choe Peng Sum, chief executive officer of Frasers Hospitality.

"These target customers not only look for residences that are close to the city's culture and trends. They also have high standards for quality and 'international' living," Choe said.

Balen noted that an increasing number of Chinese people also become loyal tenants and tend to stay with them when they travel abroad.

"Some Chinese clients are willing to stay in serviced apartments when they, for example, go shopping in Singapore or travel to Paris," she added Fraser is not only committed to developing in first-tier cities but is also trying to tap the potential in second-tier cities, including Nanjing, Chengdu and Suzhou, while at the same time increasing people's understanding of the value of serviced apartments.

"Although our agency targets expats living in China, we are finding more senior Chinese professionals are interested in high-end residences nowadays," said Wang Yiyi, who works for a Shanghai-based property agent specializing in hunting for homes for foreigners. She added that more than 30 percent of her company's customers are now Chinese.

Frasers Hospitality has just completed extensive refurbishment of Fraser Residence, located in the heart of Shanghai's Huangpu district. The 324-unit project is located close to Shanghai's landmark high-end mall Xintiandi.

A recent report by Savills said demand for serviced apartments will continue to grow as international companies expand their businesses in China and wealthy Chinese businesspeople become increasingly mobile and look to enjoy a more comfortable existence while on the road.

Although the market has largely been dominated by first-tier cities, increasing interest - especially for short-term rentals - is being seen in second-tier markets.

Ascott, another world leading owner and operator of serviced residences, also announced in 2012 that it plans to maintain rapid growth in China by adding eight to 10 new blocks of serviced apartments every year over the next three to five years.

xieyu@chinadaily.com.cn