No place like home
For most of its modern history, Hong Kong has been a city that has lived and died by its international labour force. Mid- and high-level executives predominantly in the banking and finance industries have been relocating to one of Asia’s key business hubs on contracts and then promptly moving on for decades. With Mainland China the next market of choice for almost every major product or service provider on the planet — from cars to watches, and from cosmetics to mortgages — Hong Kong remains an important launching pad for multi-nationals exploring the potential of the PRC.
The result of that exploration and the general economic recovery expected in the next 12 months is a boom in the SAR’s serviced apartment sector. Hong Kong is peppered with serviced flats, the majority on the more appealing (for expatriate execs) island from Kennedy Town all the way to Causeway Bay with upmarket flats designed to make temporary life easy. “In Hong Kong, ‘serviced apartment’ is a buzzword. Everyone can rent hotel rooms and call them serviced apartments by offering monthly rates,” states Girish Jhunjhnuwala, managing director of the actively expanding Ovolo, which currently operates six properties on the island.
Independent operators are rife, but the major market players that don’t rely on buzz in Hong Kong include Ovolo, Shama (with residences scattered across the island), CHI, the internationally branded Fraser Suites (whose Wanchai location is the only one in Hong Kong), Hanlun Habitats (specialising in Mid-Levels) and Four Seasons Place near IFC. For most of them, business is booming: research by Colliers International (Hong Kong) indicates that serviced apartment rates rose an average of 4 percent between October 2009 and January 2010 to almost HK$50 per square foot. Within that, mid-tier properties (HK$25-70,000 per month) showed the strongest growth at just over 7 percent over that period — 11 percent in prime central locations. Colliers concluded that overseas businesses preparing to enter the Mainland China market still take their first steps in Hong Kong and thereby create the steady demand that acts as the tentpole supporting residential leasing.
Until recently hotels facilitated with temporary homes, and they’re also getting into the residence game in greater and greater numbers (though largely from a sales perspective). “It’s actually getting very difficult,” to tell the difference between a hotel residence and a serviced apartment says Ovolo’s Jhunjhnuwala. “There’s a blurring of the line between the two. In terms of service, we offer every service that a hotel does. I think the main difference is that a hotel offers room service. Besides that there’s not much difference anymore.” The pre-eminent provider on Hong Kong Island is Four Seasons Place on Finance Street, whose services include housekeeping, linen service, kitchens and gym and pool. The hotel’s spa services, broadband, parking and extra storage come with added fees. Over at Ovolo on Arbuthnot Road, the same amenities are included in the rent, however the gym is offsite. But the apartments also come with Xbox and WiFi and extra storage and daily newspapers are complimentary.
Growing demand in residential sales has reduced the available rental stock in the marketplace; many owners are selling rather than leasing. The rising demand for luxury residences caused a ripple effect across the board that increased rents and drove business to serviced apartments. Major employers in the finance industry consider flexible short- to mid-term stays (3 to 9 months) cost-effective to the tune of 80 percent serviced apartment occupancy in February 2010.
But other factors have led to the serviced apartment juggernaut. Many are niche or boutique properties that appeal to expatriate temporary staff for specific reasons. Chief among them are Atria Green Residencies, which prides itself on its comprehensive eco-homes, and CHI has just announced new-build serviced flats to be ready in Wanchai for 2012 that place an emphasis on environmentally conscious communications. “Our properties are sort of on the pricey side. They do target expatriates that come from cities like Sydney and Vancouver and who don’t mind the [extra expense] for that type of quality,” explains Atria director Amil Khan. Of his competition he states, “I’m confident to say that when it comes to low-rise, urban [properties] we don’t [have any].”
Colliers predicts residential serviced apartment leasing to increase 10 percent over the next year based on the basics of supply (limited) and demand (high) and increasingly common global labour mobility. Serviced apartments will continue to fill the gap where for short- to medium-term homes that have been eliminated by strong property sales, and because, “Our sizes are similar to what a suite at a hotel would be. Those suites are expensive. We’re a lot more reasonable… This is a home feel, not a temporary feel. You won’t move a drink in the mini-bar a little bit and get it charged to your room. It’s more welcoming; the hotel concept is very unfriendly,” in Jhunjhnuwala’s view. “You want to make your guests feel welcome and not like a prisoner. It’s about how you live.”