Multinationals are bringing in more executives from abroad for brief assignments GROWING DEMAND FROM expatriates and local people for residential accommodation with flexible leasing terms continues to boost the sought-after serviced apartment market. The sector performed well in the past year, benefiting from the strong global economy, as multinational companies were keen to expand existing operations and develop new business. Jane Garnett, director of residential services at CB Richard Ellis, said: 'These moves led to more staff being despatched to Hong Kong on short-term and mid-term business assignments, which boosted demand for serviced accommodation, as reflected in the high occupancy levels registered throughout last year. 'Supply remained steady with few new apartments released in centralised areas and, coupled with increasing demand, this led to a rise in rents across the serviced sector.' According to CB Richard Ellis, overall rents in the serviced apartment sector registered an increase of 12.1 per cent last year. Rents of premier serviced apartments rose 13.4 per cent, those of luxury serviced apartments by 5.1 per cent and standard serviced flats 17.9 per cent. Occupancy levels at standard serviced apartments rose from 79.8 per cent at the end of 2003 to an average of 93.5 per cent at the end of last year. Occupancy in the premier and luxury sectors averaged 89.2 per cent. Many developments experienced an occupancy level of 95 to 100 per cent with waiting lists of prospective residents. Knight Frank residential department manager Victor Yuen said most serviced apartment properties recorded full occupancy in the past six months, while rents increased 10 per cent in the period. He said the serviced apartment sector would outperform the traditional residential market in growth and expected rents to increase another 15 per cent this year. 'Although more supply is expected in the market, demand is increasing. In particular, during international trade fairs and exhibitions nearly all serviced apartments are full. 'This encourages more developers or landlords to build and run this type of property,' he said. Mr Yuen said the rental growth of luxury serviced apartments would be slower because rents already were quite high while new supply from Four Seasons Place in Central would intensify competition between landlords. CB Richard Ellis expected rents for serviced apartments to increase by 5 to 10 per cent this year and into next because demand remained firm and supply was relatively limited. Rents at standard serviced apartments might increase by a higher percentage than the premier and luxury categories because owners of standard apartments were upgrading to capture the middle market. Ms Garnett said demand for serviced apartments would increase as companies brought in more short-term and mid-term executives. 'We anticipate demand across all sectors but particularly from junior and middle management with more moderate budgets,' she said. 'In general, demand is coming from three main areas - expatriates, returning Chinese and local residents.' Expatriates continue to come to Hong Kong for short-term business travel such as conventions, exhibitions or assignments, as well as longer-term stays. Ms Garnett said serviced apartments provided the necessary flexible lease terms and ultimate convenience for expatriates on short-term to medium-term assignments. 'As the cost of relocating families becomes ever more expensive, corporations generally prefer to relocate single people or married couples, and serviced developments in core business and entertainment districts are an ideal choice of home for these assignees,' she said. 'Many newly arriving expatriates are taking more of a regional role, using Hong Kong as a business and residential hub but frequently travelling around the Asia. For these 'execs-on-the-run', serviced apartments provide continued housekeeping, maintenance and security services during their frequent absences from home.' Serviced apartments were an attractive alternative to more conventional apartments for expatriates on a longer-term assignment, she said. These apartments were fully furnished, equipped and serviced, so tenants did not have to provide furniture, equip kitchens, buy bed and bath linen, find a domestic helper or establish utility accounts. Serviced developments usually offered 'all-inclusive' packages so tenants only needed to make one payment per month to cover all residential expenses. Ms Garnett said the serviced apartment sector was also popular among Hong Kong Chinese returning from overseas to seek employment opportunities. Many of these returnees have experienced the western lifestyle, so they prefer to stay at a serviced apartment rather than move into the family home. Traditionally, local residents would only consider moving to a serviced apartment when their home was being decorated or renovated, or when they were relocating from one property to another. In recent years, however, there had been emerging demand from local residents in the high-income group of young, upwardly mobile professionals, she said.