In the past few years, China first-tier cities have seen a rise in the numbers of youth rental apartment franchises, a new kind of property management space where a developer rents out apartments to young people, YMCA-style. By 2013, China rental housing market had reached a value of $50 billion. Now, chain apartments targeted at the young are expected to overturn China traditional rental system.
Although long-term apartment rentals are becoming the norm in China, Lei Jun, founder of Chinese mobile phone brand Xiaomi, sent ripples through the property market by investing in the apartment franchise YOU+. With more long-term apartment brands emerging such as YOU+, Mofang Gongyu, Ziru Apartment, Apartment BO and Woqu Apartment Hostel, this sector is experiencing rapid growth.
Venture capital flows have risen and the number of youth apartment brands mushroomed as big developers and hotel companies enter the space. Declining profitability due to surging land and capped home prices have led to an imbalance between supply and demand in first and second-tier cities. Buyer choices had been limited to almost only private residences until government policy reforms in 2010. Various youth rental apartment brands started to appear, and the upgrading of rental housing became an issue of increasing concern.
With a new round of policy on housing market regulations currently being carried out, young people are experiencing financial pressure
on first home loans, a lack of social security and the the need to comply with a registered residence. Millenials working in first-tier cities are increasingly unable to afford their own apartments.
“It might be possible to buy an apartment of your own after 3 or 4 years of work back in my college years. But now? I’d say 30 or 40 years,” said Yu Ting, CEO of the international youth community YOU+.
Previously at Cofco, China’s state-owned food processor, Yu Ting came onboard at YOU+ as CEO less than a year ago. And Liu Yang, founder of YOU+, has had an even less linear career trajectory of working away from home.
For those of us who have rented an apartment in a first-tier city, the boom in one-bedroom apartments has been noticable. With apartments becoming increasingly unaffordable, millennials are postponing marriage and family. Thus, the model of rental housing targeted at young people has become an emerging business, forcing developers to think outside the box for earnings growth, with the apartment leasing business bringing in steady cash flow, becoming increasingly popular.
In 2014, the “Xiaomi Apartment” became a hot news topic. It is said that Xiaomi founder Lei Jun took only 5 minutes to decide on investing an RMB 100 million ($16.3 million) series A round of funding into YOU+ international youth apartment. YOU+ and Xiaomi built rapport as collaborative enterprises.
YOU+ 1.0 was designed to address young people’s housing. The majority of fresh graduates receive a salary that can barely support their basic living costs, especially in the big cities where rent is high. To save money, young working graduates will cut down their budget for social activities and lock themselves in their rooms after work, accompanied only by computer games, TV, and social media. With a unified design blueprint, YOU+ has enabled people to live in apartments with a single bathroom. Its open space has also provided opportunities for people to have a better connection with each other.
Recently, YOU+ 2.0 international youth community was finalised.
Compared to YOU+ 1.0 emphasising apartment-letting, YOU+ 2.0 is expected to be more focused on “de-apartmentisation”, amplifying off-line networking among young people. Thus, YOU+ Qianhai dream factory in Shenzhen has become the first new 2.0. Apart from supplying basic accommodation, YOU+ 2.0 has established a new type of shared space which integrates accommodation, work, life and resource consolidation, covering 3,300 square meters.
The two eight-story complexes being renovated in Guangzhou are aimed at single people below the age of 45. Each contains 100 housing units. They will be set up to encourage a close-knit community atmosphere and foster communication among the residents. There are four types of accommodation on offer and each has a balcony. Essentially, they are dormitories set up as startup living spaces. 19-square meter four-person bedrooms each have a bathroom but no kitchen. Residents can cook in the cafeteria or communal kitchens. Each building has a gym, billiards room, bar, game room, and open areas for meetups.
The demand for new housing project models like YOU+, which addresses community needs and expectations, is huge. Like many other mega cities around the world, there are needs from different communities. In China, real estate companies are expected to be part of the solution.
By providing craft beer, music festivals and creative markets are YOU+’s attempt to re-define the meaning of community. YOU+ was able to shift from an apartment brand which stresses social networking among young people, to a content provider and operator.
From another perspective, YOU+ for millennials is not only a place to stay and socialise, but to satisfy demands for hobbies, different lifestyles offering career guidance services. All these factors allow us “an upgrade of rental housing”.
Due to a high amount of Hong Kong entrepreneurs flocking into Qianhai, Hong Kong youth have also become the target of YOU+. That is to say, YOU+ will not be limited only within mainland China.
“We are preparing the next round of overseas expansion, which is our long-term strategy. No matter whether it is Hong Kong, Macau, Taiwan, North America, Europe or Australia, where there are young people, there is YOU+,” said the founder of YOU+.
YOU+ already has two apartment projects in Guangzhou and another 8 branches in Beijing, Shanghai and Guangzhou are in construction. In China, people live in close proximity due to expensive house land prices, yet they remain isolated as they seldom have the opportunity
to interact with their neighbours. If property developers create more community spaces, which allows the residents to interact, or organise engaging activities for them, it will foster a sense of community spirit among neighbours.
With China’s young people getting priced out the property market by a mix of rising prices and fewer affordable homes, the “upgrade of rental housing” seems theoretically feasible. For millennials, however, apartment renting has always been a game of outlay and experience. And it’s hardly possible to strike a balance between the two. For YOU+ and other similar start-ups, they not only need to meet young tenants’ demands, but to create a better work-life balance for them. There is still a long way to go.
Translated by Amber Yang
Edited by Elizabeth Winkelman