Defining the product

It’s hard to visit a mixed use property development in China without hearing the term ‘serviced apartments.’ The concept, also referred to as ‘serviced residences,’could mean a variety of things depending upon who is using the term.

For a developer who is trying to extract more money from condos sales, the label might make their product sound sophisticated and draw in unsuspecting buyers who believe the moniker will help make their investment property easier to lease down the line. Or the label might be part of a strategy to sell an entire tower that was planned to host, but never landed, a hotel operator.

Increasingly however, a serviced residence is what the name suggests; a well planned and furnished residence formally operated by an established hospitality company. In China, it will likely be run by one of a handful of groups including Ascott, Frasers Hospitality, Oakwood or Shama, people who are extremely serious about average room rates, occupancy levels and returns on investment.

There are two additional scenarios where serviced apartments are commonly found in the country. The first is a stand-alone property that is managed by professional property and asset managers but not supported by a larger brand. A good example is Shanghai Centre Apartments in Shanghai, which was built in the early 1990’s and until 2000 was the default home of the city’s expatriate business leaders. Even today it continues to maintain a strong market position almost two decades on, partially thanks to a willingness to make capital expenditures and partially because of its focus on service. China World Serviced Apartments in Beijing has followed a similar path as an important component of a successful mixed use development, a model still relevant to the Beijing business landscape. The second scenario is where hotels themselves have dedicated serviced residence wings. Often the idea was to create a balanced portfolio of long stay and short stay guests all using a set of central guest amenities but giving long stay guests more living space.