China’s Housing Market Goes the WeWork Way

China’s Housing Market Goes the WeWork Way
11/12/2019 , by , in INTERNATIONAL

In China, a crowd of startups is looking to cash in on a hot real-estate market by disrupting the way apartments are rented. As property prices have soared in Beijing, Shanghai and other large cities in recent years, many young workers and new graduates have been squeezed into renting spaces within apartments—and that is where “apartment operators” have stepped in. These companies sign long-term leases with landlords and sublease to individuals, typically after renovating and partitioning, though they also sublet entire apartments.

In some ways, their business model resembles that of U.S. office-space startup WeWork, but applied to residential housing, said James MacDonald, head of Savills China research: Sign a multiyear lease on an apartment—generally bare and unfurnished—transform it into livable spaces and hope to sublet at a higher rate. Also like WeWork, many present themselves as technology companies, the argument being that they use mobile apps to manage their dealings with tenants and partners.

Apartment operators also commonly arrange loans to help tenants pay the rent. The money is typically lent by banks or online lenders for 12 or 24 months, and goes to the startup, which uses it to cover renovations, marketing and other business needs. Individual renters repay the lender, usually with no interest—that cost is borne by the apartment operators, who also guarantee the loans.

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