Demand tapers off in Hong Kong’s serviced sector as accommodation budgets get smaller
Business driven by banks may have cooled since last year, but the serviced sector remains the preferred option for new arrivals, and many operators are taking steps to keep give their accommodation extra appeal
There have been good times, and better times, for serviced apartment operators in Hong Kong. According to research by Savills, these aren’t exactly the best of times, with 80 to 85 per cent occupancy the average thus far in 2017, compared with 90 to 100 per cent in 2015.
Simon Smith, Savills’ head of Asia-Pacific research, says a softening in the short-term accommodation sector began last year as business driven by investment firms, especially banks, cooled.
“Demand from airline [personnel], lawyers and accountants is still there, but their budgets are falling,” Smith says. “Whereas accommodation budgets used to stretch to HK$50,000 or HK$60,000 per month, now it’s more likely HK$30,000 to HK$40,000.” The average length of stay also tends to be shorter for people on temporary assignments.
However, this has been tempered by increasing demand from overseas entrepreneurs drawn to Hong Kong’s thriving start-up ecosystem.
Whether they’re here for the short term, or planning on relocating, serviced apartments remain a preferred option to hotels for new arrivals, Smith says.
Temporary visitors tend to prefer smaller, single-block serviced apartments with new or fresh interior design, he continues. “If it’s near the Central escalator, that’s a big plus. [Properties in] areas like SoHo and Sheung Wan are running at 95 per cent occupancy.”
Where operators struggle to find tenants, it’s usually because of an older building which needs an upgrade, Smith continues. As an incentive, promotions of 5 to 10 per cent discount are typically available for older properties.
In terms of facilities, a gym tops the list for today’s health-conscious travellers. For smaller serviced apartment operators, Smith sees potential for partnering with nearby fitness centres – as brands like The Ascott and CHI Residences have done – to provide gym access for their residents.
“Many smaller, independent gyms and lifestyle-related businesses have been opening up all over Hong Kong,” Smith says. “This is an opportunity for serviced apartment operators to boost business by partnering with companies which can help their residents to maintain a fitness regimen and achieve their desired work-life balance.”
Making life easier for residents on a day-to-day basis can also work in the landlord’s favour. For instance, Smith says, the availability of an in-house, self-service laundry is an important consideration for many. A property might not have space to provide a gym or residents’ lounge, but could find room for a laundry which in its own way becomes a kind of neighbourhood gathering place.
Another tack operators could try is to offer specials, as hotels do to help fill rooms during low periods. It’s rare for serviced apartment landlords to negotiate on their listed prices, Smith said, but many offer seasonal promotions. Tenants can save money by keeping an eye out on websites for those.
In today’s climate, he adds, serviced apartment landlords “have got to be prepared to compromise” – especially if their buildings are older in style, or not in a central location.
Examples of properties in Central which tick the right boxes in terms of location, modern design and price point include One Eleven, at 111 High Street. Its Sai Ying Pun location and Chicago-style interiors are topped by views of Mid-Levels greenery and/or partial sea views. The single-block building is within walking distance of restaurants, museums, cafes, bars and the University of Hong Kong, and residents can even keep a pet (for an extra charge). A two- bedroom unit in the building, with a gross floor area of 780 to 810 sq ft, can currently be leased from HK$35,000 up through Savills, on special promotion.
Standing on the corner where Lyndhurst Terrace meets the Central-Mid-Levels escalator, it “doesn’t get more Central” than The Mood Lyndhurst, Savills’ Edina Wong says. This flagship property of The Mood brand offers 23 floors of newly-built apartments, including New York style one-bedroom lofts and a two-bedroom penthouse with a rooftop Jacuzzi. Studios of 468 sq ft rent from HK$29,000 up; one-bedroom units and suites from HK$30,000 to HK$42,000; and two-bedroom from HK$$75,000 up.
Located on Wyndham Street, Central, The Aveny puts residents at the heart of the Lan Kwai Fong action. The 11 suites in this boutique property – each occupying a whole floor - are designed with flair, and equipped for comfort. The property has a laundry room, daily housekeeping, and offers residents an exclusive discount for selected restaurants, spas and beauty treatments. A unit of one bedroom plus study with terrace (total size 730 sq ft) rents for HK$33,000, or HK$39,000 for the same size in a two-bedroom layout.