Young and fashionable willing to pay a premium for co-living space as government backs segment
Longfor Properties charges up to 20pc more rent for its co-living rooms
Yuppies with the taste for communal living in Beijing are being spoiled for choice as an increasing number of private firms move into this latest strand of residential leasing, thanks to backing from the government.
The latest in a long line of operators now getting involved in the trend is Longfor Properties, which is bringing its “Guanyu” long-term apartment leasing concept to the market.
The project has devoted an entire floor to “public space”, which includes a cafeteria, kitchen, pantry, gym, and even pool and table tennis tables.
Located in the culturally vibrant Jiuxianqiao area, just south of the city’s famous 798 Art Zone, the project offers 462 rooms for rent, with co-working spaces and retail stores on the lower levels. Launched just less than a month ago, the condominium has already attracted many young workers who have jobs nearby, and now boasts an occupancy rate of well over 60 per cent.
“It’s difficult to lease a whole building in Beijing’s central areas,” said Cui Mei, Longfor’s account manager for the project, as there are relatively very few fully able to be adapted to provide such a service.
Until now, operators have been able to offer various small-scale co-living rooms, spread throughout different buildings in various districts.
As do most long-term apartment leasing operators, Longfor leases space from landlords, renovates and sub-leases to tenants, mostly young people who cannot afford to buy a flat in Beijing but yearn for a better quality, serviced home.
Sector majors China Vanke and Sino-Ocean Land have also started making their presence felt in this new segment.
But Wang Gehong, founder of CYPA, a long-term lease brand in Beijing, says a major drawback of this type of “strata-titled model is that it is difficult to provide a consistent service, foster a sense of community and create a strong brand. Strata titles are a form of ownership devised for multi-level apartment blocks with shared areas.
Longfor said its Guanyu project will raise the bar in terms of standards in the segment, but pricing may be an issue.
The operator plans to charge 15-20 per cent more than similar co-living spaces in the vicinity, meaning monthly rent will ranges from 4,190 yuan (US$631) for a 15 square metre room, to 6,990 yuan for a 25 sq m unit.
To muster interest, Guanyu is offering special deals, such as offering a month and a half free if you pay for six and a half months’ rent upfront, or three months free if you pay for 12 months upfront.
Longfor’s Cui said that since many tenants here are young and from the fashion industry they do not mind paying a premium to live in such a trendy place.
Longfor has listed long-term leasing as one of its four future business pillars, which includes residential, retail and office. At the end of October it had opened 15,000 apartment rooms across 14 Chinese cities, and aims to achieve annual rental income of 2 billion yuan by 2020.
However, a major challenge for leasing operators such as Longfor with concepts like Guanyu is to consistently achieve a profit by maintaining a comfortable spread between cost and revenue.
Industry observers said that while cost of space in downtown areas of tier one cities only keep going in one direction - up, it was impossible to keep raising rents at the same pace because it would scare tenants away.
Shih Wing-ching, founder of Centaline Property Agency, was not optimistic. He said it was difficult to operate such a business as rental yields in Beijing and Shanghai were less than 2 per cent. For newly leased projects, making a profit in the short term would be very difficult.
Guanyu’s operators refused to comment on the margin, saying it was difficult to give a number because it includes expenses such as renovation and operational costs.