Inside the dorm-style Hong Kong apartments proving a hit with single young graduates
An influx of mainland students has led to the mushrooming of dormitory-style apartments
Falling housing prices in Hong Kong are not necessarily a bad thing – at least for young property innovators able to benefit from cheaper rents to convert space into something fun, such as a hub for freshly graduated employees fond of sharing space in a close-knit community.
Enter M3 International Youth Community – the brainchild of Andy Zhang, a Hong Kong-based mainland entrepreneur, who said his idea came from a popular mainland rental apartment start-up called You+ International Youth Community that offers accommodation for entrepreneurs and young people.
In 2014, You+ made many headlines in mainland media after attracting 100 million yuan in funding from Lei Jun, the founder of Chinese smartphone maker Xiaomi.
On the mainland, such youth-targeted apartments are mostly concentrated in big cities to meet pent-up demand from the large numbers of young people who choose to remain there after completing their studies. Hong Kong also fits into that market category. An influx of mainland students has led to the mushrooming of similar dormitory-style apartments locally in recent years.
“It’s all about niche markets,” Zhang said. “Our targeted customers are unmarried fresh graduates that are between 18 and 45.”
Watch: Take a tour of Hong Kong’s youth-targeted, dorm-style apartments
M3’s founding team of six including Zhang secured one floor inside an old residential building in Sham Shui Po from a landlord in March and then converted the 5,000 sq ft place into 30 rooms ranging from 50 sq ft to 150 sq ft that go for monthly rents of between HK$3,900 and HK$6,500. An extra 10 per cent goes to property management.
It has been fully occupied since opening in September. The tenants – mostly young, educated mainlanders – share two bathrooms, a conference room and public space.
Eyeing young entrepreneurs, the founders also ensure a mix of tenants from different fields through interviews.
“We wish we could make it more international, because Hong Kong is an international city,” said Zhang, who has helped build two start-ups after graduating from Hong Kong Polytechnic University. “They stay here because they won’t feel alone. They can easily find someone to have a drink with over dinner after work.”
Tenant Li Yanjuan, 23, echoed that feeling. After graduating from Hong Kong Baptist University with a masters degree in information technology management last year, Li now works at the IT department of Bank of China in Central.
It takes her about 45 minutes to go to work from Sham Shui Po every day and her tiny room costs one third of her monthly salary. Still, she finds the place appealing.
“I live here because it’s fun. You will eventually find someone who shares similar interests with you, if you have many people around you.” Li said.
For M3’s founders, now seems a good time to expand their apartments since the city’s home prices are expected to fall in 2016 and they plan to roll out 200 new rooms from at least two projects this year.
“We wish we could open one rental apartment next to every MTR station in Hong Kong, but the speed of expansion has to do with the city’s economic development,” Zhang said.
The weakening of the city’s tourism industry, due to a decline in mainland tourists, that has forced the closure of a few small hotels and hostels could open up more opportunities. Zhang said the vacant premises could be filled by rental apartment operators who could take over hotels’ licences without the need for further applications to the Buildings Department.
M3 opened a second project in Tsim Sha Tsui in December after taking over a floor previously operated by a hotel. It offers 14 rooms at monthly rents of between HK$8,000 and HK$13,600, and 11 of them have been occupied.
But localising You+’s model in Hong Kong isn’t easy. Unlike many of You+’s projects on the mainland, which involve renting out space in renovated factories, the Hong Kong government bans subdivided flats in industrial buildings. That means it’s more difficult to find a whole building or several connected floors to be converted to apartments and public space. Since the whole concept of a youth apartment is built on sharing and socialising, a lack of public space could be detrimental to its success.
Higher labour costs for furnishing and shorter leases also led the founders to focus on trimming budgets without sacrificing quality. So far, each M3 project had cost around a seven-digit investment that would probably take four years of rents to pay back, said Darren Wong, one of M3’s co-founders.
Meanwhile, You+ is considering teaming up with M3 to develop youth apartments in Hong Kong.
You+ co-founder Liu Xin said the city was “one of our major overseas markets for expansion.”