Co-living is becoming more common due to its proximity to major urban centers and cost savings.
The co-living market is booming in Asia Pacific, according to JLL's recently released Co-living in Costly Cities - Asia Pacific survey, as more people move to cities for work or education. This is creating new opportunities for regional real estate developers and investors. apartments for sale qatar
With property prices in gateway cities rising, co-living provides residents shorter and more flexible lease terms, as well as ready-to-move-in convenience, compared to condominiums. Operators could save up to 25% in expenses over the conventional renting model, according to a case study in the report.
Simultaneously, investors stand to save a large amount of money. Working with multi-functional co-living operators, such as a building manager who performs repairs, a property manager who collects rent, and a letting agent who finds tenants, removes the need to pay the three levels of fees associated with a typical residential property.
"Co-living fills a housing void that conventional living categories don't," says Rohit Hemnani, JLL Asia Pacific's COO and Head of Alternatives. "Tenants only have to negotiate with one operator instead of paying for deposits, electricity, furniture, and agent fees since co-living spaces are completely furnished with cleaning and maintenance services."
"Due to lease arrangements and ownership models, the co-living business model differs greatly," he says. "Because many co-living operators have few assets, they depend on profit-sharing leases or management agreements, while others prefer fixed market-based leases that provide landlords with a predictable income for a longer period of time. Co-living operators may theoretically offer higher wages to property owners and provide efficiencies around cleaning, decor, and services due to their ability to scale operations."
Although the co-living sector is still in its infancy in most parts of Asia Pacific, JLL predicts that it will grow in popularity over time, attracting a larger and broader tenant base.
Despite being two of Asia's most expensive cities to live in, Singapore and Hong Kong have a small number of existing operators looking to expand quickly. Hmlet, which received funding from Aurum Investments and Sequoia India, and Singapore Management University's collaboration with The Ascott Limited to operate lyf@SMU, are two examples of co-living investments in Singapore. Meanwhile, as building owners look to increase rental yields, Hong Kong's underperforming hotels and serviced apartments are turning to co-living spaces.
According to Denis Ma, the head of research at JLL in Hong Kong, "The change from co-living as a form of affordable housing to co-living as a lifestyle option is attracting a new wave of investors to Hong Kong. A variety of new schemes have opened in the last year with rents that are comparable to, if not higher than, those seen in the private rental sector. The performance of these modern schemes is redefining the fundamental principles used in co-living investment underwriting."
Aside from that, China's multifamily rental market has evolved quickly, making it one of the most mature co-living markets in the world. Several developers have aggressively bid on land sites designated for rental property in order to create their own branded co-living operators.
Australia, on the other hand, has lagged behind due to a lack of multifamily en bloc goods and tax policies that penalize residential rental businesses. However, as residential market prices soften, more developers are turning to the burgeoning built-to-suit industry.
"As tenants continue to drive demand and investors chase higher yields, co-living is likely to gain market share in Asia Pacific over time. Smaller companies will be absorbed by larger players with more built-to-suit goods on the market, resulting in increased acquisition activity "Nick Wilson, JLL Asia Pacific's Head of Capital Markets Research, sums it up.