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China’s abandoned makeshift hospitals transformed into long-term rental apartments

BusinessChina's abandoned makeshift hospitals transformed into long-term rental apartments

In January, the buzz on China’s social media platforms centered around the conversion of a makeshift hospital into long-term rental apartments for skilled professionals in Jinan, the capital city of Shandong province. The property industry’s attention was drawn to the potential for the long-term rental apartment sector.

As COVID-19 continues to impact the industry, the Jinan Innovation Zone transformed the former Fangcang Shelter Hospital into flats to assist enterprises in restoring their operations to normalcy and cater to employees’ demand for decent accommodation, as reported by the local Jinan Daily.

Director of Shanghai-based E-house China Research and Development Institution, Yan Yuejin, said that China’s new phase of COVID-19 response has opened up an opportunity to revitalize temporary hospital projects and repurpose them for residential use. This approach can be applied to most of these facilities, which are usually situated in suburban areas and close to industrial parks, to speed up the development of the long-term rental housing sector.

The long-term rental apartment sector in China has experienced a shake-up, with some listed companies experiencing ups and downs after the outbreak of COVID-19. Danke Apartments, a Beijing-based company, was even delisted by the New York Stock Exchange in 2021.

However, the rental housing market has been supported by favorable policies and measures through 2022, seeking to provide decent accommodation for skilled professionals in demand. Last September, the Beijing Municipal Commission of Housing and Urban-Rural Development introduced a slew of measures to protect tenants’ rights and ensure equal treatment in welfare, education, and public services. Shanghai also implemented new supportive policies to simplify the application process and relax certain conditions and maximum housing provident fund withdrawal limits for rent payments.

With the demographic structural shift in China’s housing consumption demand and comprehensive government policy support, CBRE expects China’s number of multifamily rental apartments to surpass 12 million units by 2030. Xie Chen, head of research with CBRE China, believes the sector’s strong leasing fundamentals and potential for asset liquidity will make multifamily house renting one of the most attractive commercial real estate investment asset classes in China in the next ten years.

Investors should target core markets such as Shanghai, Beijing, and the provinces of Guangdong, Zhejiang, and Jiangsu, as well as the Beijing-Tianjin-Hebei region, the Yangtze River Delta region, and the Pearl River Delta region. In 2022, the total stock of the rental housing market in Shanghai reached 108,000 units, with an average occupancy rate of 86.3 percent. The market is expected to reach 189,000 units by the end of 2023, benefiting from higher-quality rental housing projects and the continued improvement of amenities such as fitness centers, study rooms, and community centers.

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