Deal focus: Ziroom carves a rental niche

As China’s booming real estate market pushes home prices ever higher, the young and lower-income population finds it hard to get a foot on the property ladder. Around 270 million urban residents chose to rent rather than buy apartments last year, and the rental market is expected to reach RMB2.9 trillion ($453 billion) in value by 2025.

For Beijing-based Ziroom, those people are a huge untapped opportunity in a housing market still mainly focused on home ownership. The company has just raised a RMB4 billion Series A round from investors including Warburg Pincus, Sequoia Capital and Tencent Holdings to make its mark on the rental landscape.

“In recent years, the government has been shifting policy to encourage rental rather than purchase of properties. This is favorable for the long-term rental market,” says Gordon Ding, managing director and head of TMT [technology, media and telecom] investments at Warburg Pincus. “Demand for smaller units and a shortage of one-bedroom apartments have led to a significant demand and supply gap in first-tier cities. A company like Ziroom, with its decentralized format, is better positioned to meet the pent-up demand.”

Founded by a team of senior professionals from Chinese real estate agency HomeLink in 2011 and spun out in 2016, Ziroom provides a link between apartment owners and tenants. Rather than buying properties itself, the company leases rooms from landlords and, after renovation, re-leases them on to new tenants.

This arrangement allows landlords to offload most of the burdens of property management, while renters have the assurance that Ziroom’s services will be consistent across its properties. Currently, the company manages 500,000 rooms for 200,000 owners, and more than 1.2 million renters have used the service. It wants to reach 800,000 apartments across nine cities by the end of 2018.

“As China’s largest long-term rental apartment asset manager, Ziroom has significant advantages in client acquisition, mobile internet application, big data collection and day-to-day operations,” says Ding. “Our research and user interviews discovered that the net promotor score of Ziroom is significantly higher than its peers.”

The company’s future plans include moving beyond its core property rental service to become a community hub for residents. It has organized nearly 1,000 events for renters since spinning out from HomeLink, and plans to increase these activities as a brand-building exercise. It will use the capital from the Series A round for this purpose, along with staff recruitment and training, improving its technology platform and adding new services for its residents.

“Ziroom will invest in IT systems to ensure efficient operation and better user experience – for example, it is very keen to become the first apartment operator to offer intelligent home appliances to its renters,” Ding says.   

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• Topics
• Greater China
• Expansion
• Real estate
• Support services
• Technology
• China
• Warburg Pincus Asia
• Tencent
• Sequoia Capital
• Growth capital