HEC Paris focuses on China’s housing rental model, rental agency ZIROOM featured as a case study

How to manage 1 million rental housing units

BeiJing，China – April 17, 2024 —

Housing and renting have always been subjects of international discourse, with countries exhibiting diverse development models under the influence of demographics and market conditions. As one of the world’s most populous countries, China’s rental market and its developmental strategies have garnered the attention of leading international business schools.

The housing leasing sector, rich with business opportunities and potential for value creation, has seen ZIROOM emerge as the largest institutional housing leasing platform in China after 12 years of development. The HEC Business School in Paris conducted a study on ZIROOM, including it in a case study titled “ZIROOM: Reshaping the Housing Rental Industry through Technology and Innovation.” This case study underscores ZIROOM’s successful operational model, crafted through an understanding of the supply and demand dynamics in China’s housing rental market, positioning ZIROOM as a leader in China’s housing rental platform sector, committed to sustained, high-quality growth.

China’s institutional housing rental platforms have gained global recognition, establishing the country as home to the largest housing rental market worldwide.

China has the world’s largest housing rental market. Driven by urbanization, income growth, and supportive government policies, the housing rental market has experienced significant changes. Current data reveals about 100 million renters, for demand, in China’s first-tier and emerging cities, with nearly 60 million units available for rent, for supply side. This bilateral demand has propelled the housing rental market to become one of the fastest-growing industries in China, expected to expand from 1.8 trillion in 2022 to 2.8 trillion by 2027.

Despite the vast market, the housing leasing industry is challenging to navigate. On one hand, the sector has been impacted as China enters into fluctuations with global economy; on the other hand, the sector presents a long, complex service chain resistant to internet disruption, requiring continuous reinvestment and a respectful approach to operation. As a result, scale breakthroughs is a hard process.

In 2011, ZIROOM introduced the institutional long-term rental platform model to the Chinese market and has continued to innovate in products, services, supply chains, and technology, enabling ZIROOM to withstand several industry downturns. ZIROOM has established a presence in 10 core Chinese cities, managing nearly one million units. In 2021, in response to macroeconomic and industry changes, ZIROOM launched the “gain rent” scheme to promote the company’s sustainable development. Over three years, nearly 200,000 units have adopted this model, affirming the innovation’s success and establishing continuous, proven innovation as ZIROOM’s strong support through cycles.

HEC Business School in Paris views ZIROOM’s development favorably, noting its rich experience, substantial housing management volume, and standard renovation schemes allow it to leverage significant scale effects, maintaining high operational efficiency and low cost. By positioning itself as an “institutional leasing” platform rather than a mere housing leasing intermediary, ZIROOM has crafted a highly successful operational model.

The business model’s healthy evolution has enabled ZIROOM to create a distinctly Chinese long-term rental model.

The housing rental industry, encompassing various upstream and downstream industries, faces new challenges from global, economic, and macro housing rental market changes. Traditionally, the industry, essentially a “stock management” business, aims for continuous income generation over the years. However, traditional long-term rental models aiming for rapid expansion often overextend future development capabilities.

Against this backdrop, ZIROOM has pondered the potential for adjusting the long-term rental business model, considering it necessary to reassess the company’s fundamentals and introduce a new business model to address future uncertainties and continue ZIROOM’s success.

In 2021, to foster healthier industry development, ZIROOM pioneered the “Value+ Lease” model, notably transferring renovation costs to owners while offering them stable, sustainable, and reliable income through a “no price difference, no vacancy period, guaranteed income” mechanism, promoting a more transparent development approach for owners.

Moreover, the transition to the ” Value+ Lease” model is driven by high digitalization. As early as 2015, ZIROOM led the industry in adopting electronic contracts, marking the advent of paperless renting. That year, ZIROOM also enabled users to complete tasks such as house searching, viewing, signing contracts, paying rent, accessing living services, and terminating leases entirely online, enhancing rental safety and convenience. For owners, ZIROOM offers standardized renovations and comprehensive lease management, including cleaning, maintenance, and tenant communication services, providing more competitive income schemes and a hassle-free experience compared to conventional renting. This end-to-end experience for users, coupled with significant efficiency improvements for the company, showcases ZIROOM’s digitalization across property expansion, traffic generation, occupancy management, lease administration, and service personnel management.

The case study highlights ZIROOM’s advantages over competitors in the industry, including its vast experience, extensive housing management portfolio, and the ability to harness significant scale effects for high operational efficiency and low cost. Additionally, ZIROOM’s internally developed IT systems and the complete digitalization of rental and service processes have significantly reduced communication costs between ZIROOM staff, tenants, and owners, positioning ZIROOM at the forefront of international innovation in the rental market.

Diversified business layout, emphasizing high-quality sustainable growth

The case study thinks, with the introduction of the ” Value+ Lease” model, ZIROOM’s management team is considering growth options for upcoming few years and delving into the details of how to make steady growth sustain.

First and foremost, achieving higher quality growth in order to achieve commercial sustainability is of great importance. The case points out that the long-term plan indicates that ZIROOM is considering to expand its layout in more first and second-tier cities. In the middle of this expanding, ZIROOM will delineate “commercial districts” that are suitable for the rental lifestyle of youngsters based on the city’s population and economic development. Aiming at attracting more people, ZIROOM will also open up couples of offline stores in the “business district” where owners can avail themselves of knowing such progressiveness nature and higher income rental programs are provided to improve the efficiency of signing contracts.

In addition, ZIROOM is exploring new business growth points, upgrading its product matrix from “rental” to “residential”. ZIROOM Home Furnishings is one of the new growth points. The integration of cleaning, moving, maintenance, and other services into ZIROOM Home Services in 2021, and its full marketization, signifies ZIROOM’s exploration of new business growth areas. Currently, ZIROOM Home Services delivers approximately 10 million orders of family services annually. Notably, leveraging years of deep industry experience, ZIROOM has expanded into home decoration services, particularly with its market-oriented complete home solution “ZiHOME”and has begun to experiment with “self-operated” asset investment projects.

The case study asserts that ZIROOM, as a leader in China’s housing rental platform business, will make visible growth by its sustainable and diversified business layout in the future.

In recent years, China has introduced policies favorable to the long-term rental market’s growth. Market-oriented and professional long-term rental institutions like ZIROOM have become crucial in bridging the supply-demand gap in China’s urban housing rental market. This case study not only enriches academic discussions but also serves as a motivational model for businesses aiming to thrive in the competitive and evolving landscape of the future housing rental market.

Contact Info:
Name: James Tang
Email: Send Email
Organization: HZHD Brand Management Ltd.
Website: http://www.ziroom.com

Release ID: 89127365

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