Expansion shifts from cities to outer suburbs

Australia's suburbs and regions are the next growth sector for serviced apartments as the weight of offices and workers shifts to city fringes, the Quest group says.

Workforce decentralisation by businesses and the growth in regional towns are driving the expansion of longer-stay accommodation, Quest Serviced Apartments chairman and founder Paul Constantinou said.

"We're seeing a lot of corporates coming to us, especially in the regional towns because that's where there's been a lot of expansion," he said. "In the past it was very city-centric."

He said the main growth areas were in the western suburbs of Sydney and Melbourne.

This week Quest began the construction of a 97-apartment complex at Melbourne's Tullamarine Airport, which it expects to finish within a year.

Mercon Group will construct the five-level building on airport land.

In the past two years, Quest has opened serviced apartments in 15 locations, including Sydney Olympic Park and Dubbo in NSW, Breakfast Creek in Queensland, and Bendigo, Werribee, Bundoora, Melbourne, Caroline Springs and Frankston in Victoria.

On the drawing board are plans for Mentone and Traralgon in Victoria and Nowra in NSW.

The group also expects to finish construction of another eight serviced apartments in Australia's eastern states and the Northern Territory in the next year.

Victoria-based Quest dominates the longer-stay serviced apartment sector, developing and controlling 153 serviced apartments via a franchise model in Australia and New Zealand.

Local competitors Mantra Hotels and Adina Apartment Hotels are about a third of Quest's size. Others are entering the sector, too - Meriton is setting up a serviced apartment arm in NSW.

The group is also likely to face competition from foreign groups such as the Hilton and InterContinental chains, which are establishing similar properties under sub-brands: the Homewood and Staybridge suites in Asia.

Mr Constantinou said interstate travel was picking up and corporate clients were tending to stay longer in places they visited.

"We see the corporate market as growing. It's not boom times but there's insufficient supply in the marketplace," he said.