A Four Seasons address for less than a Hong Kong flat’s monthly rent as serviced apartments compete with hotels for guests

Lam Ka-sing
·5-min read

Hong Kong’s serviced apartment operators are facing another tough year as rents slumped for an eighth straight quarter, with Four Seasons Place – one of the priciest in the city – slashing the starting rent by 27 per cent as the Covid-19 pandemic drains the city of business travellers and expatriates.

Rents fell by 1.4 per cent in the first quarter, bringing the losses to 24 per cent over the past two years, according to data compiled by Savills. Apartment-like rentals reached the lowest since the first quarter of 2007. Occupancy levels averaged 57 per cent vs from 62.5 per cent on average in 2020, according to industry data.

While many sectors of the city’s economy have suffered from border closures and civil unrest since 2019, the damage to the hospitality industry is worsened by intensifying competition with long-stay incentives offered by hotel operators seeking to survive the city’s worst recession on record.

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“Apart from price competition between serviced apartments, operators have to face the threat from cutthroat pricing by hotel long-stay packages, since hotels are desperate to maintain occupancy with zero inbound tourism,” said Simon Smith, regional head of research and consultancy in Asia-Pacific at Savills. “Locals have remained the major demand driver for the market despite more modest budgets.”

Four Seasons Place, part of the International Finance Centre complex in Central, is pricing its smallest city-facing studio unit measuring 547 sq ft on the lowest floor at a promotional rate of up to HK$40,000 (US$5,151) a month, according to a leasing representative. This works out to about 27 per cent below its published rate of HK$54,600.

A 788 sq ft private flat at Serenade in East Mid-Levels was recently advertised with an asking price of HK$42,000.

Four Seasons Place does provide “limited special offer on selected units” from time to time as a way of marketing, according to a spokeswoman, who declined to comment on rates for specific rooms.

Chinachem Group is offering its smaller serviced apartments at The Lily in Repulse Bay at HK$110,000 to HK$130,000 a month. Unfurnished units measuring 1,300 to 1,400 sq ft could be rented for HK$50,000 to HK$60,000 based on long-term leases of two years. These units fetched as much as HK$80,000 about two years ago.

Gateway Apartments in Tsim Sha Tsui’s Harbour City is holding a promotion until July, offering its one-bedroom units with a study, measuring 1,091 sq ft, for HK$55,000 a month. These flats are normally priced at HK$66,900 to HK$74,300.

The Mercury in Tin Hau is asking for HK$31,000 a month for a 462 sq ft unit with a “buy-one-get-one-free” deal until May 15. The incentive, however, is capped at two months, even for longer-term leases.

K11 Artus in Tsim Sha Tsui, one of Hong Kong’s most expensive serviced apartments, is offering the smallest studio measuring 512 sq ft with a city-view balcony on the lowest floor at a promotional rate of HK$45,000 a month for a 12-month lease. That is 21 per cent below the level when it first opened for booking in the third quarter of 2019.

The operator is focused on enhancing the entire residential experience by providing valuable services appreciated by long-stay residents, not so much on driving tactical rate-related promotions, according to K11 Artus, which is owned by New World Development.

K11 Artus, located at the site of the former New World Centre in Tsim Sha Tsui, comprises 287 serviced apartments. Photo: Handout
K11 Artus, located at the site of the former New World Centre in Tsim Sha Tsui, comprises 287 serviced apartments. Photo: Handout

Still, these promotional deals underscore the deepening recession in the city since March 2020 as the government sealed its border for non-residents to fight the Covid-19 pandemic. Tourist arrivals in Hong Kong shrank by 99.5 per cent in the first quarter.

If border restrictions remain in place, Savills estimates overall rent may fall another 5 per cent this year.

Yet, as occupancy rates slid from as high as 89 per cent in 2018 to 59 per cent in December last year, serviced apartments have never been more attractive. Young professionals, seeking to avoid getting locked into two-year leases in a volatile job market, have helped stabilise the market.

“The industry has been hit hard by travel restrictions and a decline in expat relocations because of the coronavirus pandemic,” said Maggie Lee, senior director and head of residential agency at Knight Frank. Operators will keep offering incentives and discounts to boost occupancy rates, as well as increasing commission fees to agents, she added.

With the pandemic situation stabilising in the first quarter of 2021, Lee expects international companies to start sending their foreign employees to Hong Kong. Rents should gently pick up in the near future, although promotion programmes are likely to continue.

“We believe this sector hit the bottom last year,” Lee added. “We foresee occupancy rates improving in 2021.”

This article A Four Seasons address for less than a Hong Kong flat’s monthly rent as serviced apartments compete with hotels for guests first appeared on South China Morning Post

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