KE Holdings (BEKE) Q1 2024: Rental Services Revenue Surges 189% as Platform Diversifies Beyond Home Sales
BEKE’s first quarter exposed the depth of China’s real estate contraction, but also revealed a pivotal shift: home rental and renovation services now drive a third of revenue, with rental services up nearly 190% year-over-year. As legacy home transaction volumes dwindle, BEKE’s rapid expansion of connected stores, influencer-led customer acquisition, and operational discipline in new business lines point to a more resilient, multi-segment platform. Strategic investments in network scale and digital engagement are set to reshape the company’s revenue mix and risk profile in the coming quarters.
Summary
- Rental and Renovation Outpace Core Transactions: New business lines now anchor growth as home sales stagnate.
- Digital and Store Network Expansion: Influencer-driven traffic and connected store growth offset market headwinds.
- Strategic Shift to Platform Model: Revenue mix evolution signals a long-term pivot beyond traditional brokerage.
Business Overview
KE Holdings (BEKE) operates as China’s leading integrated platform for residential real estate, generating revenue primarily from existing and new home transaction services, as well as home renovation, furnishing, and rental management. Its business model blends a vast agent/store network with digital tools, connecting buyers, sellers, renters, and service providers across over 42,000 stores. The company’s revenue is now increasingly diversified, with emerging businesses such as rental and renovation services representing a growing share of the mix.
Performance Analysis
BEKE’s Q1 results underscored the severity of China’s property market reset, with revenue down sharply year-over-year due to a high base and collapsing new home demand. Existing home transaction revenue fell 37.6%, while new home transaction revenue dropped 41.5%. Gross margin compressed to 25.2%, reflecting not only lower transaction volumes but also a shift in revenue mix and higher operating expenses.
The standout was the company’s rental services, which grew 189% year-over-year and now contribute over 10% of total revenue. Home renovation and furnishing revenue rose 71%, with both segments benefiting from operational improvements and integration with the core transaction business. The expansion of connected stores and influencer-driven customer acquisition delivered efficiency gains and partially cushioned the impact of the market downturn. However, increased personnel and marketing costs for new business lines weighed on operating leverage, with operating margin dropping to 0.1% on a GAAP basis.
- Revenue Mix Shift: Home renovation, furnishing, and rental services together now account for 35% of revenue, up from 21.7% a year ago.
- Store Network Scale: Active stores surpassed 42,500, with nearly 3,000 added year-over-year, reflecting aggressive network expansion.
- Efficiency Gains in New Stores: Newly connected stores saw agent productivity reach 90% of platform average within six months, with small community stores outperforming larger peers.
Despite a challenging macro, BEKE’s operational agility and focus on emerging business lines are reshaping both its risk profile and future growth levers.
Executive Commentary
"The scaling up of agent and store network also further enhances the most fundamental infrastructure of our one-stop residential services... Their performance also motivated us to improve our service competencies to better serve the diversified types of stores."
Stanley Peng, Co-founder, Chairman & CEO
"Revenue for home renovation and furniture business continues to grow at a fast pace... Starting from this year, we have begun to disclose the financial of our home rental services due to their growing scale and the significance in our business and the revenue from this service accounted for over 10% of total revenue in the first quarter."
Cao Xu, Executive Director & CFO
Strategic Positioning
1. Rental and Renovation as Growth Pillars
BEKE’s rental management and home renovation businesses are now central to its platform evolution. Rental services alone delivered 189% growth, with managed units exceeding 250,000. Renovation revenue rose 71%, aided by tighter integration with brokerage channels and improved delivery timelines. These segments are less cyclical than home sales and provide recurring, service-driven revenue streams.
2. Aggressive Store Network Expansion
The company added nearly 3,000 stores year-over-year, with a focus on “connected” partner stores and community mini-stores. The 90-day retention rate for new stores remains high at 98%, and productivity metrics suggest that even small, two-agent stores can outperform larger peers, especially when deeply embedded in local communities. This distributed model enhances both reach and operational flexibility.
3. Digital Customer Acquisition and Influencer Ecosystem
BEKE’s Galaxy Plan, an influencer-driven digital initiative, now covers 63 cities and boasts over 12,000 agents with 36 million followers. Short video and live streaming channels are delivering thousands of transactions per quarter, with influencer-driven sales up 103% year-over-year. This digital front-end is increasingly important as traditional channels fragment and customer decision cycles lengthen.
4. Policy Adaptation and Old-for-New Initiatives
BEKE is actively participating in government-led inventory reduction and home replacement policies. Its “Sell Old Homes for New Ones” model, pioneered in Qingdao, has been rolled out in 12 cities and is positioned to benefit from policy tailwinds aimed at stimulating transaction activity and clearing unsold inventory.
5. Capital Allocation and Shareholder Returns
Despite market turbulence, BEKE continues to return capital to shareholders, with buybacks and dividends in 2023 totaling 159% of net income. The company remains committed to balancing strategic investment in growth with disciplined risk management and capital efficiency.
Key Considerations
This quarter marks a decisive pivot in BEKE’s business model, as non-transaction services become a material driver of growth and margin stability. The following considerations are shaping the company’s trajectory:
Key Considerations:
- Rental and Renovation Scale: Sustaining high growth in these segments is critical, as they offset cyclicality in home sales and provide recurring revenue.
- Store Network Productivity: Expansion must balance scale with per-store efficiency, especially as smaller stores demonstrate outsized productivity gains.
- Digital Engagement Leverage: The influencer ecosystem and digital marketing investments are increasingly vital for customer acquisition and retention, especially among younger, digitally native buyers and renters.
- Policy and Regulatory Sensitivity: Ongoing government interventions in the housing market present both risks and opportunities, particularly for inventory reduction and home replacement initiatives.
- Margin Recovery Path: Operating leverage is under pressure from higher fixed costs and marketing outlays; stabilization depends on scaling new business lines and restoring transaction volumes.
Risks
China’s property market remains in a prolonged adjustment, with new home supply and demand at historical lows and price declines persisting. BEKE’s continued expansion in rental and renovation services exposes it to operational execution risk, while increased fixed costs and aggressive network growth could pressure margins if market recovery stalls. Regulatory changes, especially around inventory reduction and home replacement, introduce further uncertainty. Investors should monitor the pace of revenue mix shift and the sustainability of non-transaction segment growth as key risk factors.
Forward Outlook
For Q2 2024, BEKE management signaled:
- Continued cautious optimism on existing home transaction volume, with signs of stabilization and sequential improvement in key cities.
- Ongoing weakness in new home transactions, but improved liquidity and confidence expected as government inventory reduction policies take hold.
For full-year 2024, management expects:
- Further scaling of rental and renovation services as a percentage of total revenue.
- Strategic investments in network expansion, digital engagement, and operational efficiency to support long-term platform growth.
Management highlighted:
- “We remain committed to supporting our business in optimizing financial resources allocation and making every effort to help our business achieve long-term development.”
- “We are focusing on strategic investment to expand our store network, enhancing training for the frontline service providers, iterate product technology, upgrade quality services, and improve the middle-to-back office operations for our emerging business.”
Takeaways
BEKE’s Q1 results validate the company’s pivot to a platform model, with non-transaction services now anchoring growth and reducing cyclicality risk.
- Revenue Mix Inflection: Rental and renovation now drive a third of revenue, providing a buffer against home sales volatility and supporting margin stability as the market recovers.
- Multi-Channel Customer Engagement: The combination of physical network expansion and digital influencer activation is creating a differentiated, resilient acquisition funnel.
- Watch for Execution on Scale: Sustaining high growth in emerging segments and restoring operating leverage will be central to BEKE’s ability to deliver long-term value as the property market resets.
Conclusion
BEKE’s Q1 revealed both the depth of China’s real estate downturn and the company’s strategic pivot toward platform resilience. With rental and renovation services now at scale and digital engagement accelerating, BEKE is positioned to weather continued volatility and capitalize on policy-driven opportunities in the evolving housing ecosystem.
Industry Read-Through
BEKE’s rapid rental and renovation growth, alongside its influencer-driven digital model, signals a structural shift for China’s real estate services sector. As transaction volumes remain subdued, platform players with diversified revenue streams and agile digital engagement will be best positioned to capture share and margin. The success of BEKE’s “Sell Old Homes for New Ones” policy participation also highlights the increasing importance of government partnership and policy adaptation. Other real estate brokers and service platforms must accelerate diversification and operational integration to remain competitive in the new housing market landscape.