Residents and expatriates in the world’s most expensive city now have a chance to make some big savings on rents.
Hong Kong’s embattled serviced apartment operators are slashing rents, in some cases, by as much as half, and offering sweeteners to boost occupancy rates that have been hit hard by travel restrictions and a sharp decline in relocations because of the coronavirus pandemic.
“Whilst hotels can entice locals with attractive staycation packages, serviced apartments rely heavily on business travellers and corporate relocations – with those new to Hong Kong utilising them whilst searching for more permanent homes,” said Will Robertson, executive director at Nest Property.
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“The serviced apartment industry, like many, has struggled as a result. With fewer companies relocating employees internationally, occupancy is likely to remain low and once-fixed rental rates are now highly negotiable.”
The serviced apartment segment was already reeling from the anti-government protests, with occupancy rates declining from around 89 per cent in 2018 to 71 per cent in 2019, according to Nest Property. The average in 2020 was 62.5 per cent, according to Savills, with the level easing from 68.4 per cent in January to 59 per cent in December.
After sealing borders for non-residents last March to contain the coronavirus, Hong Kong saw a 94 per cent year on year plunge in visitor arrivals to a 36-year low in 2020.
The pandemic has been a “double blow” for the industry, Robertson said.
L’hotel Causeway Bay Harbour View is offering serviced apartment units starting at HK$9,999 (US$1,290) per month. The hotel, however, said that the rents are only valid until August, and is subject to availability. It is holding open days from Wednesday to Sunday and requires those interested in signing up to register online in view of social distancing measures.
The flats, ranging from 301 to 344 sq ft, were priced at HK$12,000 a month before the offer. The units went for as much as HK$19,000 at their peak before the coronavirus outbreak sent the hotel and serviced apartment sector into a downward spiral. The offer comes with HK$1,200 dining credits and cleaning service twice a week.
The offer comes after a successful push at Lodgewood by L’hotel Wanchai , where one-bedroom flats were rented out at HK$14,000 per month during the open day last Friday and Saturday, down from just under HK$20,000 per month previously. Both hotels are owned by Chinachem Group.
Serviced apartment rents fell for seven straight quarters, which added up to 14.5 per cent at the end of the fourth quarter of 2020, according to Savills. In 2020 alone, serviced apartment rents sank 12.5 per cent.
This decline in serviced apartment rents is attracting young professionals, many of whom do not want to sign standard two-year rent leases.
Savills said that serviced apartment rents may have bottomed out for now as any further reduction could lead to losses. The operators are holding out for the borders to reopen and seasonal boom, it added.
They, however, said that tenants of upscale serviced apartments now have more room for negotiation, with many bargaining for shorter leases of 12 months because of concerns over job security. With no new arrivals, operators are offering rent reductions of 10 per cent to 20 per cent on longer leases and free upgrades to larger units to increase occupancy levels, they added.
The monthly rent for a three-bedroom suite at The Harbourview Place, Sun Hung Kai Properties’ luxury serviced apartments located in The Cullinan, was recently priced 41 per cent lower than in November 2018, according to Nest. The rents here start at HK$92,900 in February, an employee said.
At Hong Kong Parkview in the Southern district, executive suites measuring 1,240 sq ft that originally went for HK$83,000 to HK$91,000 per month, is available for HK$66,000, and comes with HK$4,000 credits that can be used for dining and clubhouse facilities, according to an employee.
Nest’s Robertson said that the future of the serviced apartment sector looks uncertain in the post-pandemic era as business travel is unlikely to return to previous levels.
“The increased use and success of videoconferencing technology during the pandemic means employees have become comfortable doing business remotely and may find international trips to be less of a necessity in future.”
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