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SCMP Reporter

Local developers, previously concerned with quick returns, are now seeing the benefits this sector offers and are teaming up with foreign partners

Foreign-funded investors and operators are seeing good investment opportunities in serviced apartments in Shanghai.

And local developers, not to be left out, are going into partnerships with the international players and  welcoming  their co-operation.

One of the new firms is Lanson Place, a serviced apartment arm of Singapore-funded Wing Tai Asia.

According to Karen Li Fung-ling, a director of corporate development at Wing Tai Asia, Lanson Place  recently entered into a joint venture to  build its first mainland serviced apartments in Shanghai.

'The Shanghai market is now mature enough,' said Ms Li, who oversees serviced apartment projects in Hong Kong, Malaysia and Singapore.

'There is a very limited supply of top-notch serviced apartments  in [the city].'

Ms Li would not reveal the location and the company's joint-venture partners. However, it is believed the project consists of  100 units in a 'prime urban location'.

According to property consultant Colliers International, there are only 12 quality serviced apartment projects in Shanghai, which are operated by well-known hotel groups such as The Ascott Group, Marriott International and Westin.

The average vacancy rate for these apartments is only 8 per cent.

'We literally have clients lining up to rent a place,' said Wayne Zane, an associate director of the research department of Colliers International in Shanghai.

Serviced apartments in Shanghai are being rented out for an average of US$25.1 per square metre a month for  three to six months, Mr  Zane said. This  compares with an average monthly rental of US$19 per square metre  for a luxury villa on long lease.

According to Mr Zane, only three high-end serviced apartment projects will be built in prime locations in Shanghai in the next two years. Among them is  one  that will be operated by the luxury hotel operator Four Seasons Hotels and Resorts in Wei Hai Road, which is also home to a Four Seasons hotel. Another, near Xintiandi, was recently partly acquired by Morgan Stanley.

In contrast with serviced apartments, the luxury residential market in general is experiencing a relative high vacancy rate of about  18per cent, according to Mr Zane.

'In the past, local developers mostly looked for quick cash returns so many of them did not bother to invest in hotel or serviced apartment projects,' Mr Zane said.

He said foreign-funded developers, including those from Hong Kong, believed Shanghai offered good investment opportunities in the serviced apartment sector.

Serviced apartments generated a net yield of about 7.5 per cent  a year compared with a maximum yield of about 5 per cent for hotels, which come with less profitable food and beverage operations.

But DTZ Debenham Tie Leung consultant Andy Yuen said some local developers were still opting for hotel projects.

'Joining hands with an international hotel operator can enhance a developer's reputation in the industry, and this cannot be valued in money terms,' he said.



Serviced flats find a home in Shanghai