This article is taken from the Summer 2024 issue of

Think Global People magazine

Click on the cover to access the digital edition.View your copy of the Summer 2024 issue of Think Global People magazine.

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Greater emphasis on hybrid workspaces, wellness amenities, sustainability and tech integration, as well as evolving consumer preferences and industry innovations, are creating new trends in the market for serviced apartments.

Growing demand for new types of accommodation

Carrie Hartman, president of accommodation platform 3Sixty, says she has seen a clear shift towards greater interest and investment in serviced apartments.“What we have also seen is hotel portfolios gravitating towards this type of service over the past few years,” she says. “A lot of major hotel brands that typically offered standard rooms are now starting to offer ‘branded residences’.“This might be in the form of new brands that they are adding to their portfolio, or it could be a strategic move to enter into partnerships with serviced apartment brands in order to offer the flexibility and convenience of a hotel with the amenities of a serviced apartment.”Some of this has been driven by changing working practices. With assignees not needing to travel to the office every day, they need an area in their accommodation where they can work productively. Carrie says the trend is also influenced by ‘bleisure’ – the blend of business and leisure travel – where people might extend their stay by a few days after their business trip to enjoy some extra time off.

The rise in hybrid workspaces

Longer-term stay options, such as monthly or yearly rentals, are becoming more popular among remote workers, expatriates and individuals seeking temporary housing solutions. This is prompting serviced apartment providers to offer flexible and competitive extended-stay packages.“There is definitely a need for this flexibility,” says Rebecca Gunn, business development manager at Icon Relocation. “Individuals in temporary housing might not need to be in the office every day, so they need to have a work-from-home facility. In more modern blocks this has become standard, but with older units, providers might partner with a hybrid workspace nearby that guests can use for free. It is definitely something that the providers are becoming more aware of.”Fruzsina Hodson, senior manager – group destination services at Santa Fe Relocation, says that since the pandemic, there has been a notable increase in the availability of service apartments equipped for work, allowing for a more comfortable remote-work experience.“Hybrid working is a lot more prevalent in the market and people don’t want to be inside their apartment full time confined to one space,” she says. “Before Covid-19, it was really hard to even get a desk or a chair. In a lot of apartments, there was only a breakfast bar people had to work from. That is now changing, especially in the new builds.”

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Shifting demands and rising costs put pressure on the market

Rebecca Gunn of Icon Relocation says that flexibility is still crucial due to the unpredictable nature of rental markets, especially in cities like London.“The rental market globally is tough at the moment and it can be challenging to find 30 days of temporary accommodation at short notice,” she says. “We have strong relationships with serviced accommodation providers, which enable us to source accommodation and also to request extensions when needed, even at short notice.”She says the serviced apartment market in key global cities currently has limited movement and low stock levels. This trend was exacerbated by the pandemic. It has led to a landlord’s market and longer tenancy lifecycles, reducing the availability of rental properties as a result. For example, some providers have imposed minimum-stay restrictions or long tenancy contracts, which can affect short-stay assignees.“Landlords were able to dictate their terms and, as a result, tenancies became longer,” she says. “There is just not the number of regular properties available now. The lifecycle of a tenancy is far longer than it was and stock is being refreshed at a slower rate.”When properties do come up for rental renewals, there can often be significant price increases as well. Challenges vary across regions, with Europe, the US and APAC facing similar issues of low stock levels and limited movement. In some regions, rental properties may not even hit the open market before being rented out due to strong networks and word-of-mouth referrals.Fruzsina Hodson says the client profile for relocation packages has also changed demand. Santa Fe Relocation is now helping a wider variety of clients, including younger assignees.“Formerly, it was the VIP individuals who were coming with families and so requirements and budgets were completely different,” she says. “Now relocation has opened up to almost everybody. The majority of our clients are younger individuals. As digital nomads they will go anywhere, pack a bag and travel the world. They don’t have a family and may be better suited to co-living and sharing.“If you look at the serviced accommodation market, the largest property is usually a three-bedroom apartment, while most units are just one bedroom. That makes it much less appealing to executives with families and pets.”She says Europe has always offered a variety of serviced apartments, while the US market is saturated following a period of new building. In Asia, availability varies by market. Often, getting access to prime and well-located properties depends on the strength of the relationships you have built with local providers.“While serviced apartments are the preferred option due to regulation, reliability and employer duty of care, some clients, especially in Germany, opt for Airbnb-style rentals for lower-budget options,” says Fruzsina Hodson. “However, outside of Germany these are less regulated and may pose challenges around duty of care, quality assurance and safety.”

A sector that continues to boom

The ‘Global Serviced Apartment Industry Report (GSAIR) 2023’ found that occupancy rates have boomed since the pandemic. Its survey compiles data from 3,000 corporates, serviced apartment operators and agents. Its analysis reveals that 2022 saw a significant rise in business as demand returned. In 2023, travel, assignment and relocation business continued to grow, despite inflation and rising energy costs driving rates up.“The traveller and assignee demographic is changing,” the report says. “Gen Z now make up 30% of the world’s population and is expected to account for 27% of the workforce by 2025. This shift has opened eyes in the c-suite to the need to provide accommodation, such as home stay and co-living, that appeals to those travellers.“Demand for and supply of serviced living – fully furnished accommodation including kitchen facilities, with some private and communal spaces – are growing,” the report says. “That’s because they are cheaper to rent and profitable to build. In London, serviced living grew by 26.7% in 2022, with further growth predicted.”Serviced apartments increasingly offer hybrid workspaces, catering to remote workers, assignees and digital nomads who seek a comfortable and productive environment for both work and leisure. The sharing economy, popular among younger assignees and travellers, a desire to combine work and travel, and the ability to have a more flexible working life have all helped drive the change.

A bright future for serviced apartments

Despite the challenges, serviced apartments provide a much-needed bridge between hotel rooms and longer-term rentals. While costs have been rising and stock is limited in some regions, the market has started to recognise the potential of serviced apartments, as evidenced by the growth of new, purpose-built units. With younger people taking up corporate assignments, the profile of the business traveller is changing too, with wellness, co-living and co-working top of their agenda. The growth of ‘bleisure’ and a customer preference for having space to work as well as live in their accommodation, means that these preferences will continue to drive the sector forward.

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