Jul 09, 2019 (China Knowledge) - Beijing's luxury serviced apartments market is now taking a hit after an increase in supply coupled with a fall in demand from expatriates as foreign firms scale back their Chinese operations set in.
Many foreign firms have started moving their production facilities out of China due to rising cost concerns and the current trade tensions. Foreign businesses, particularly manufacturers, have been losing market share in China amid stiff competition from local companies in recent years. The higher tariffs under the Sino-US trade war only adds to the pressure. As the Chinese operations of these foreign firms scale back, the demand for rented accommodation for their senior executives has weakened.
Will demand from foreign firms had already started falling even before the trade war, but the problem now is that an increased supply will add further pressures to future rent. This year, major projects that have typically raised rental prices by 5% to 10% annually in the past have hardly increased their rent given the tighter budgets faced by foreign firms.
Operators of the apartments are moving to appeal to more Asian or Chinese clients so as to fill the gap. But it is not easy since Asian firms generally have a smaller budget for rent.
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