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Serviced Apartments: Book Early, Stay Longer

High demand, low supply and low vacancy rates - the most popular characteristics for Moscow's real estate market - seem to be proper for the serviced apartments sector as well. The biggest demand for short-term rentals is in the Russian capital's center. According to the experts estimates, there are about 200 serviced apartments in this part of the city. Needless to say, their occupancy rates average 95% year-round.

Realtors recommend placing an order for a serviced apartment at least a month in advance due to their "increasing popularity." An Internet search can help the traveler find an apartment for $35 per night - accommodations for backpackers on the outskirts of the city with poor quality of renovation and furniture. Meanwhile, most of the short-term renters are employees of large international and Russian corporations. These tenants usually require a greater amount of services and amenities in their apartments and prefer to apply to professional management companies. Moscow occupants of serviced apartments are either people who come to work on short-term projects (from one to six months), or people who need temporary lodging for several weeks while looking for a long-term apartment. About 85% of the serviced apartments' tenants are expatriates. As a rule, they stay in serviced apartments from several weeks to several months.

"It is convenient to stay in a hotel if you come for two-three nights only but if you come for two weeks, it is more comfortable to stay in a fully equipped serviced apartment," realtors recommend.

One of the most popular requirements for Moscow's serviced apartment is a central location. Another important factor is a high level of security: tenants prefer entrances that have concierges and video surveillance on the premises.

"We rent apartments from a private landlord for a long-term period and sublet those to our clients," says Denis Shmarev, the general manager of Intermark Serviced Apartments, CJSC. "We pay rent on time, take care of the maintenance issues and we pay all the taxes on behalf of the landlords. So there are no headaches for our landlords. As for our clients, they save up to 50% of their lodging budget if they choose to stay in a serviced apartment compared to staying in a hotel."

According to Shmarev, the rates for serviced apartments in the city center vary depending on the location, size, quality of renovation and furniture. Sometimes, rent for a longer periods can drive down the rate. The prices for studios range from $95 to $160 per night; for one-bedroom apartments from $130 to $200, for two-bedroom apartments from $200 to $260 per night. However, these rates are essential for economy and business class units. As for luxury properties, this sector is not well-developed yet and there is no supply for short-term rent in this sector. In general, a serviced apartment is up to 40-50% cheaper than a Moscow hotel of similar quality. Russia's capital sees the greatest demand for one-bedroom apartments, followed by studios and two-bedroom apartments.

"The cost of the serviced apartment usually includes housemaid service, bed linens and property management service," says Alla Efremova, the spokeswoman for DOKI-realty. "However, some companies include 'welcome packs' (basic foodstuffs and toiletries) and bottled water delivery into the cost. As for the transfers, visa support and registration service, they are usually provided for additional fees. When visa support or transfer is necessary for the client, realtors appear as mediators as there are many professional providers who supply that."

Agents agree that the serviced apartments market is only emerging in the Russian capital. Taking into account the low availability of hotels in downtown Moscow, and the increasing number of high net worth travelers to the city, the potential for this market to grow seems to be high. Meanwhile, there is limited number of major realtors dealing with short-term rentals. Today, many agents don't consider this segment attractive and rewarding.

"The fact that there are not many companies in Moscow providing serviced apartments is connected with the significant expenses, including the necessity to support a maintenance staff, which reduce the margin to a minimum," says Tina Surma director of residential leasing at Penny Lane Realty.

"Generally, there is a deficit of rental apartments in Moscow as this segment is not profitable for investing," says Mikhail Gorokhovsky, BEST-realty vice president. "The dynamics of rental price growth is far behind the dynamics of the selling prices. For example, it would take more than twenty years of rent to cover a cost of an average economy-class apartment. More entrepreneurs will become interested in the rental business when the market responds to the current imbalance between rental and selling prices."

The Moscow News, 2006-45

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