Serviced apartments in Hong Kong more resillient

KUALA LUMPUR: The serviced apartment sector in Hong Kong has been relatively more resilient than the luxury residential market during the current economic downturn, according to real estate services agency Colliers International (Hong Kong) Ltd.

According to the "Serviced Apartments Overview - June 2009" report published by Colliers International recently, between August 2008 and April 2009, the average rental of serviced apartments registered a -12.9% fall compared with a fall of -24.6% for luxury residential leasing property.

The pace of serviced apartment rental decline slowed to -1.7% month-on-month (m-o-m) in April 2009 to HK$44.78 psf per month.

The average rental of serviced apartments decreased 6.4% quarter-on-quarter (q-o-q) in 4Q2008 and 5.4% q-o-q in 1Q2009. Average luxury residential rentals fell 13% q-o-q in 4Q2008, while its downward adjustment narrowed to 8% q-o-q in 1Q2009 as inexpensive opportunities were snapped up by early-bird occupiers.

The rate of decline in rentals tapered off further to less than 2% m-o-m, with average unit rate at HK$34.87 psf per month. Individual serviced apartments of medium-to-large sizes experienced a double-digit fall in rental.

Director of research and advisory Simon Lo said in a statement that a number of occupiers had chosen to relocate to cheaper areas, or to downgrade their accommodation in terms of size or quality due to the general tightening in housing allowances.

"Sustained weakness in occupational demand and the cost-cutting initiatives among multinational companies remain the major challenges for the overall residential leasing market," he added.

Colliers said the leasing demand has dropped significantly, and some vendors have changed their leasing strategies by offering competitive rentals to fill their units in view of a demand contraction.

Some 75% of serviced apartment tenants have also chosen short term leases of less than six months, it added.

Colliers expects rentals in the luxury residential market in Hong Kong to fall 12% over the next 12 months, while the potential rental downslide in the serviced apartment sector will be limited to 8% during the same period, as the latter will continue to be resilient with its services and flexible lease terms.

By The EDGE Malaysia (by Racheal Lee)