Ziroom and Xiangyu typically source rooms from property owners. They then renovate the properties and rent them out at a premium, in the process, time and renovation fee could a burden for both of them. It is actually an asset-light model.
A house listed at Xiangyu's website. PHOTO: Credit to Xiangyu
According to ZHANG Duo（张多）, Deputy General Manager of Xiangyu（相寓）, the company is considering acquiring heavy-assets, in the company's case, which is apartment properties, reported by Security Daily.
About 1.66 million rooms were owned or managed by rental housing companies and developers at the end of last year, according to an April report by Meadin.com（迈点）. Xiangyu had about commanded a share of 27% in Chinese rental housing market in 2017 according to Reuters.
Ziroom had about half a million rooms in China and commanded a market share of 30% at the end of 2017(see this article). Xiangyu, was a rental unit owned by 5I5J（我爱我家）, had 530,000 rooms in over 14 cities in China, with tenants exceeding 5 million as of March 2018. As of September 2018, Xiangyu administers 310,000 apartments with more than 95% occupancy rate.
Revenue comes from services Xiangyu provides for their customers, including the asset-management fee paid by owners and value-added services by tenants.
The average rent in Beijing jumped 21.16% (yoy) in August, compared with 3.12% a year earlier, data from the China Real Estate Association (CREA) shows. Other major cities in China has also seen this trend at that time until authorities in China urged ten rental housing companies to ink an agreement. Those companies including Ziroom vowed not to raise rents while they enhance their outputs in two months on August 20. According to officials of the Beijing Real Estate Agency Association(BREAA), they have delivered what they said in public by October.
The main reason for soaring rent results from these companies aggressive strategy in securing flats and competing with each other. To obtain a target room, they paid more money compared to the average level in the industry. Interestingly, HU Jinghui（胡景晖）, a former vice president at 5I5J claimed that Xiangyu will never do that for the spinoff of 5I5J had no fear of funding and thus pressure from its investors. It was not long before the man resigned, no matter out his mind or not.
Ziroom and Xiangyu typically source rooms from property owners. They then renovate the properties and rent them out at a premium, in the process, time and renovation fee could a burden for both of them. It is actually an asset-light model.
Xiangyu will still face pressure if the company could not gain profit from high turn-over rate like Ziroom, the asset-heavy model is worth investing.
——Author: LinYan.Write to LinYan at LinYan@EqualOcean.com