Local serviced apartment market predicted to remain under pressure in 2021

Shanghai's serviced apartment market will continue to face headwinds this year despite a recovery in both vacancy rates and rents registered in the fourth quarter of 2020, according to international real estate services provider Savills' latest research.

Citywide, the vacancy rate of serviced apartments declined 1.4 percentage points during the October-December period from the previous quarter to 14.8 percent, while rents edged up 0.4 percent quarter on quarter to an average monthly rate of 230.7 yuan  (US$35.6) per square meter, according to Savills' data.

Year on year, vacancy rates declined 1.5 percentage points and rents fell 3.1 percent. 

"As borders reopened at the end of the third quarter, the city experienced a notable decrease in vacancy rate as tenants stranded overseas returned to their leases or signed new contracts," said Chester Zhang, director of Savills China research. "This didn't last, however, as border controls tightened significantly in mid-November."

On the supply side, two projects opened during the last quarter of 2020, increasing the city's total inventory to 9,969 units.

Greystar Real Estate Partners, which invests in, develops and manages rental housing properties, made its China debut by unveiling the 474-unit LIV'N 833 near Zhongshan Park in Changning District, while Zhongrong International Trust opened its 293-unit Riverdale Residences near Century Avenue in the Pudong New Area.

Savills officials said the local serviced apartment market will be under pressure over the next 12 months amid tight border controls and travel restrictions imposed around the world. They advise landlords and operators to remain focused on attracting new tenant groups, particularly domestic tenants, whose ratio increased by close to 20 percentage points on some projects over the past year.