Latest research showed that the Chinese hotel sector is not the only fast-growing accommodation option in this burgeoning economy.  

Serviced apartments in China, especially internationally branded ones in gateway cities Beijing and Shanghai are becoming well established.  Beside Beijing and Shanghai, serviced residences operated by overseas operators are also emerging in major cities such as Dalian, Tianjin, Guangzhou and Shenzhen.

Although this lodging type made its way into China some 15-20 years ago, the supply of internationally branded serviced apartments has increased over the last five years.  "Serviced apartments in China traditionally catered to expatriate residents seeking long-term leases, however, changing market dynamics and an increase in demand for short-term accommodation are nudging them closer to a hotel product," said Mr Andreas Flaig, Executive Vice President of Jones Lang LaSalle Hotels in China.  

Given the size of China's economy and relatively consistent corporate relocation policies by foreign companies in China, Mr Flaig expects serviced apartment development to be reflected in other major cities throughout the country.

Investors are increasingly cognizant of the appeal of serviced apartments. Their flexible positioning between hotels and residential apartments allows investors to reap return opportunities in either sector depending on the market environment.  "Serviced apartments offer owners and operators the flexibility to meet an evolving demand profile. With their ability to also cater to short-stay guests, branded serviced apartments are able to leverage their brand and distribution in times of high transient demand, " said Mr Hans Galland, Vice President, Jones Lang LaSalle Hotels in Shanghai.

Increased demand, better quality supply and an increasingly transparent property market are driving the development of serviced apartments in China. Serviced apartment transactions in 2005 and 2006 demonstrated that there is an active and liquid market for serviced apartments in China's major cities. International investors, particularly US opportunity funds, and experienced owner-operators make up the bulk of the buyers which appreciate the various exit options available to them.

The latest addition to Jones Lang LaSalle Hotels' FocusOn research series, Serviced Apartments in China: In Transition, details the background to the transformation of serviced apartments in China and identifies the opportunities and risks for aspiring owners, investors and operators of such products.  

It also provides a snapshot of Beijing and Shanghai as well as cities across China that may witness the next wave of serviced apartment development.