Ziroom secures $621m financing, reflecting investors' hopes

Ziroom, a Chinese online apartment rental platform operator, has secured $621 million in first round financing, a reflection of investors' high hopes for the country's expanding rental market－especially for the young migrants to large cities.

Different from traditional housing agents, Ziroom buys or takes over properties from landlords, then fully furnishes them in a way that appeals to younger people. Nationwide, Ziroom now administers 500,000 rooms, a number expected to reach 800,000 this year.

However, securing more housing resources seems to be less important than before, as Xiong Lin, CEO of the company, has merely mentioned it in the 2018 agenda. Instead, he is heavily emphasizing the service side, making Ziroom's apartments more appealing to young, white-collar city workers.

"The market seems to forget the white-collar class' need for better living condition," Xiong said. "Most rental service providers do not invest much in the services side, such as cleaning, moving and maintenance." He added that development of intelligent furniture and home appliances will also be the focus of the following year.

Warburg Pincus, one of Ziroom's investors, said it holds the company in high regard, saying Ziroom provides an easier housing solution for new migrant workers between the time they graduate and the time they buy their own houses.

Warburg Pincus also invested in other rental businesses, including Mofang Apartment, a rental operator and 58.com, a category website.

Cheng Zhanglun, partner at Warburg Pincus, predicted that more than 70 percent of the new first-tier city residents will choose to rent a place, creating a 1 trillion yuan ($155 billion) market in long term house rentals.

Research conducted by Homelink Real Estate Brokerage Co, the country's largest real estate agency, also predicted that the market will reach 2.9 trillion yuan by 2025.

Neil Wang, president of consulting firm Frost& Sullivan in China, also recognized the long-term rental market is promising as there will be a mobile population of more than 291 million by 2020.

"Before 2012, the rental market was dominated by private landlords," Wang said. "But now, the branded apartment, known for furnishing style, logistics service and community culture, is more attractive to city workers."

"Given the number and size of the current players in the industry, the market is still very promising," he added.

Indeed, a number of groups, ranging from internet companies to hotel brands looking to expand their business, have already invested in the rental market with very specified demographics.

Some big-name players also include Port Apartment of Vanke Group, targeting the newly graduated, Danke Apartment and lyf of Capita-Land, which are trying to attract millennials.