These articles below can also be found in the June 2010 issue of Serviced Living Guide:
On the Up
Serviced Apartments still hold boutique appeal.
Memories of the economic downturn faded fast for those involved in serviced apartments. While prices plunged and occupancy sank in other sectors, serviced apartments remained resilient. Their traditional bent to flexible leasing proved an added attraction as many faced employment uncertainty. Now, with the economy in recovery serviced apartments are set to rise even higher.
Over the last decade serviced apartments have broken away from their traditional association with hotels to become their own entity, and are no longer booked for a maximum one-month stay in lieu of finding a more permanent home. These days, serviced apartments are viewed as a property solution in themselves with young singles or couples, especially, lured by no-strings leases and fully-furnished apartments with a desirable address. Improved transport links to China and an increased flow of business to the Mainland has also opened the market to apartments located in the New Territories. Grace Lo, Assistant Director of Sales for Marketing and Serviced Suites at the Harbour Plaza Resort City, in Tin Shui Wai reports 98 per cent occupancy since January, and adds that 10 per cent of her guests are involved in China-related business. Close proximity to borders at Nanshan and Futin, Lok Ma Chau and Lowu are appealing to such businessmen, but city links have also opened up client demographics. “MTR’s Kowloon-southern link takes only 30 minutes for our guests at Tin Shui Wai to reach Tsim Sha Tsui. It has really triggered demand from those who work in town but intend to escape from their hectic business routine,” says Lo, who also counts Hong Kong residents, local and native English teachers as key tenants.
However Hong Kong has seen most significant growth in boutique offerings, with developments focused around two main strategies; conversion of a commercial or residential block into serviced apartments, or the upgrading of an existing offering, which has resulted in a large supply of smaller apartments across all price categories. There is more to come. Regional Director and Head of Residential Leasing and Relocation Services for Jones Lang LaSalle, Anne-Marie Sage estimates 200-plus serviced apartments launching in 2010. The majority of these will be in the boutique or standard tier, and will vary from 200-700 sq ft concentrated on Hong Kong island.
Yet, in a recent report for Jones Lang LaSalle, Sage outlined a renewed interest in larger residences suitable for senior executives, which are in short supply. “The Lily at 129 Repulse Bay Road, which was just launched earlier in April, is the only serviced apartment that offers large units between 1,800 sq ft to 3,900 sq ft, making it truly a jewel in the crown,” said Sage.
During a recent roundtable on the industry, property specialists expressed agreement that a re-energised stream of financiers and the return of hedge funds entering the SAR marked the outlook positive. In order to meet a demand upswing though, the industry should focus efforts on providing a greater diversity in terms of location and room size for residents with differing lifestyles, said Andrew MacGeoch, Head of Mayor Brown JSM’s Hospitality And Leisure Group, Asia, speaking at the meeting. “These people will require varying standards of accommodation, with different price points. For example senior financiers may require a more luxurious offering, whilst more junior staff may be seeking lifestyle driven accommodation. Families may prefer to be less centrally located whilst singles may seek an apartment in the heart of the city in close proximity to their office and other amenities. Serviced apartments that can offer different price points and a range of end products will be a good fit for this market.”Finding available apartments from 900 sq ft is a challenge that existing companies are trying to overcome. Castle Asset Holdings traditionally attracts expatriates who have relocated to a first or junior position in a company. Castle, who entered the market five years ago, has concentrated its expansion strategy on acquiring a greater number of units in varied sizes enabling clients to progress up as promotions and job experience allows.“Most of our clients sign on for their two-year work contract. If they start in a 400 sq ft apartment, we hope that when they re-sign they’ll also move up to a 600 or 800 sq ft unit,” says Investment Property Consultant, Richard Elms. However, Elms notes that finding suitable available units in key areas, such as Central, and increasingly Sheung Wan, is a challenge that forces the company to seek burgeoning areas as demand continues to rise.
Existing serviced apartments have focused efforts on diversification by advertising unique incentives designed to attract a niche guest. For the team at Excellent Court in Kowloon’s Jordan, for instance, promoting the use of bathtubs has proved successful in attracting a high number of Japanese guests, says Marketing and Public Relations Executive Juliana Fan.While the industry itself was less volatile, the effects of the downturn may still be felt. The serviced apartments industry overseas has already begun to respond to companies cutting accommodation costs by offering weekly and even daily stays. While experts note that quicker turnarounds can result in higher management costs and requires greater staffing, the emerging trend shows signs of surfacing in Hong Kong, with some properties offering weekly stays.
Looking into 2010 and beyond, serviced apartments are still a popular choice and have gained traction by fulfilling a need between the expense of an extended hotel stay and the commitment of a long-term lease. Adjusting to market changes will propel growth. “It is an industry that is doing well,” says Sage at Jones Lang LaSalle. “They are definitely giving hotels a run for their money.”
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