Serviced apartment rents to drop further

Rents of serviced apartments are expected to drop further this year due to falling demand as a result of declining global economic growth.

'Rents of luxury-end serviced apartments have dropped by 10 to 15 per cent after the global financial crisis,' said Edina Wong, a senior director of residential leasing at Savills.

Ms Wong said the rental cuts were in line with declining demand for serviced apartments that emerged in the fourth quarter of last year.

She added that it was too early to tell whether this was due to the financial crisis, but early signs were that reservations for coming months signalled a continued fall in demand.

'One-bedroom and studio units have higher vacancy rates, while the larger units with two or three bedrooms still have high occupancy,' she said, suggesting that there would be steady demand in the mid-rental range especially for the boutique-style quality designer suites. 'Take-up for the high-end units will be slow as the clientele of these units were mostly from the financial sector.'

Ms Wong expects there will be correction in rents of between 20 and 30 per cent in high-end serviced apartments this year where the effect of the financial turmoil will be greater. However, mid- and lower-priced apartments could see a moderate reduction of 10 to 15 per cent in rents.