SEVERAL long-term rental apartment brands have exited the market in Shenzhen and other major cities over the past year because of their unsatisfactory business operations, according to Nanfang Plus.
Color Apartment, founded in Shenzhen in 2015, mainly leased out renovated and furnished apartments to tenants after renting apartments from the landlords.
The company raised 16 million yuan (US$2.46 million) in its series A round of funding and received equity financing via an online platform. However, in the middle of last year, the company announced the suspension of its business on its official website.
Gowo Apartment, founded in September 2015, was another long-term rental apartment provider that targeted white-collar workers in big cities. The company raised 3 million yuan in its angel round of funding at the end of 2016, but its official website was shut down a year later and the company’s head has been out of contact.
Haoxijia Apartment, based in Xi’an in Shaanxi Province, adopted the same operation model as Color Apartment, but the company’s business operation was unsatisfactory, which led to capital chain rupture and financial losses for both tenants and landlords last February.
According to a report released by cricchina.com, the biggest challenge confronting long-term rental apartment brands is making a profit, as the housing prices are soaring more rapidly than rents, which has narrowed profit margins for small and medium-sized brands.
Instead of exiting the market, some long-term rental apartment brands have chosen to merge and be acquired by bigger brands. For instance, Veeker Apartment in Shenzhen was taken over by Mofang Apartment last August. The report noted that merger and acquisition would help leading brands expand their businesses and raise the concentration ratio of the industry.
Currently, there are over 300 long-term rental apartment brands in first-tier cities nationwide. Some of the leading brands, such as Mofang Apartment, YOU+ Apartment and Port Apartment operated by Shenzhen real estate developer Vanke, have taken shape during the rapid development, according to the report.