Rental Industry Attracts Foreign Investment
Investment is ticking up domestically – and abroad – in China’s residential rental housing sector. Government-backed policies have been shifting market interest from property sales into rental housing, though a recent Savills report also points to decreasing housing affordability, increased mobility in the workforce, and consumer trends as other major factors driving sector.
Overseas private equity funds – US’s Tiger Global Management firm, Singaporean GIC Private, and others – have been making headlines over the past few months due to a number of recent, high-profile investment deals.
A domestic and foreign mixed financing round on Beijing’s Danke Gongyu in February closed at ¥644 million. And more recently, Tiger Global Management led a ¥451 million round.
In May, GIC co-launched a platform with Nova Property, which itself is backed by Warburg Pincus and Wang Qian. The platform launched with an initial ¥4.3 billion fund, giving GIC a minority-stake in the project. Warburg Pincus has further invested in other rental firms, namely Mofang and Ziroom.
“There is a large and growing population of renters within our target income group, with a limited supply of quality institutionally-owned and professionally-managed projects,” said Lee Kok Sun, CIO of GIC’s real estate division.
China’s market of renters is set to grow from 190 million to 250 million by 2025, a trend that analysts say will be driven by the younger demographic. In reflection of this, many operators are including social spaces, gyms, and cafes in their projects in a bid to appeal to urban professionals with disposable income.
A rising number of start-ups in the sector are operating on an “asset-light” approach, wherein they sublease, renovate, and provide tenancy management services for existing spaces.
“The logic is simple. So many urban professionals can’t afford a home, but want a quality life,” said Huang Haibin, Harbour’s founder and CEO.
At the same time, some start-ups are operating on an “asset-heavy” approach in hopes of reaping asset appreciation, while others are forming partnerships with hotel management groups.
“For a hotel group it is very natural to extend its business to the rental flat market,” said Jiang Weidong, general manager of Cjia. “Design, building and operation is similar.”
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