Low corporate demand hits serviced residences' revenues

Ascott Residence Trust suffered the most with a 7% RevPAU drop.

Singapore’s serviced residences (SR) are suffering from low corporate demand for the long term, OCBC Investment Research said.

OIR analyst Deborah Ong said that unlike their hotel counterparts, which have recovery potential, SR’s revenue per available unit (RevPAU) was more of a mixed bag.

RevPAUs dropped 7% YoY for Ascott Residence Trust’s (ART) Singapore-based SR portfolios but increased +7.6% YoY for Far East Hospitality Trust (FEHT), which is “unsurprising” given its low base in the first quarter of 2017, Ong said.

“According to channel checks, corporate demand for long term stays appear muted,” the analyst said. “Some possible reasons include tightened rules on hiring foreigners and the reduction in minimum rental period for private homes from six months to three months.”

However, Ong is not too worried about the Urban Redevelopment Authority’s (URA) proposal to allow short-term rental of condominium apartments on platforms like Airbnb. “We see the 80% consent rule as being a generally high threshold to cross,” she added.