Early in the 19th century, shared living spaces were a standard, located in the shape of hostels and boarding homes for pupils. Home sharing has since evolved with the times, especially with the increase of the sharing market in today’s age.
Co-living, according to JLL Singapore, describes all-inclusive communal dwelling, where tenants input individual lease agreements in exchange for private bedrooms, shared community spaces and building amenities. Even though co-living players operate on a business model similar to serviced apartments, the distinction is that co-living utilises private homes for a longer interval, notes JLL in its own report,”Co-living at Singapore”.
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Gaining traction as an alternative to traditional residential leasing at a globalised world,”co-living provides opportunities for interaction at a communal dwelling setup that’s appealing to many younger expatriates”, says Ong Teck Hui, senior manager of research and consultancy, JLL Singapore. In traditional residential leasing, tenants lease a space or a solitary apartment.
Ong also notes that the majority of the demand for co-living”comes out of expatriate tenants, although fascination with local millennials that are seeking greater autonomy and that have the financial means has also increased”. He adds that the present demographic — a combination of millennials and Generation X’ers — may comprise seniors in the foreseeable future.
Co-living operators at Singapore
Presently, there are at least eight co-living operators in Singapore. The latter was set in 2018 throughout the start-up generator Antler, which procured in September 2019 a seed financing of greater than US$two million ($2.7 million). This will be utilized because of their expansion in Southeast Asia, and also to build their technology out.
Overseas co-living brands such as Commontown have entered Singapore as well. Produced by South Korean construction company Kolon Global Corp beneath its subsidiary Libeto, Commontown was set up in Seoul in 2017. It transferred its headquarters to Singapore in 2018 as a strategic base for the global expansion plans.
In Singapore, for properties zoned beneath residential usage, URA regulations state that a minimal three-month stay is needed. On the other hand, for co-living companies that are operating on sites approved for serviced apartment usage, they are able to give short-term stays using a seven-day minimum stay interval; while for people that have a hotel license, daily rental services are available.
Concerning holding construction, some operators may decide to purchase and fit their particular co-living facility to get more management. Having a greater capital outlay required, this comes at a chance of greater illiquidity and compacted yields, consequently slowing down expansion plans.
According to JLL, many operators Decide to go with this”asset-light” strategy. This means leasing individual residential components or an whole block out of a landlord, retrofitting the house, and then subleasing out it. There’s also no guarantee of the continuing availability of the assumption when the present lease expires. More lately, Hmlet has started its largest facility to date, at 150 Cantonment Road, the prior Corrupt Practices Investigation Bureau headquarters. Situated near Tanjong Pagar MRT Station, the construction is on a 76,000 sq feet site and provides 150 individual rooms upward for stay across two 3-storey blocks.
Apart from this version, a few operators run on the management contract version. That is when they signal long-term management agreements with developers or landlords to help run their co-living space.
Lyf, for instance, is a mixture of owner-operated and management contract versions. Lyf Funan Singapore, that opened in September 2019, has a gross floor area of about 121,000 sq feet and contains 412 rooms across 279 apartments. In the subsequent 3 years, two additional lyf possessions in Singapore are slated to start. All these are lyf Farrer Park Singapore that will available in 2020, and lyf one-north Singapore that will available in 2021. Zoned under residential usage, lyf one-north Singapore is going to probably be approved for serviced apartment usage, catering to individuals that are expected to stay for between 2 weeks and one year. They concentrate on creating applications and platforms to match roommates into the most compatible location, operator, and/or space.
Another strategy is to product differentiation, and targeting niche markets.
“Some operators attempt to concentrate on creating a exceptional experience due to their tenants such as holding talks, craft workshops, hackathons or other neighborhood events that foster greater interaction and communicating,” he says. “Other operators create their own apps so as to enable members to manage invoices, get invitations into the latest events, get in contact with housemates, book housekeeping services and much more.”
The brief, flexible leases may be one of co-living’s main draws, but Ong cautions that this may also be a risk factor. As the co-living operators frequently signal long-term lease with landlords nevertheless earn their earnings through shorter-term rental agreements, Ong says that operators”have to be wary of the volatility in its own earnings streams, especially during the days when economic downturn may negatively affect the leasing demand from foreign tenants”.
In Singapore, in which the home-ownership rate is about 91%, co-living operators face another challenge — demand for co-living has been mainly driven by expatriate tenants, Ong notes.
“The current economic downturn is forecast to become 2020 and industry conditions are likely to remain challenging. Thus, cautious hiring and companies restructuring may have any negative impact on leasing demand for co-living from overseas tenants,” says Ong.
Colliers’ Singh, nevertheless, anticipates”some expansion in this industry in the short to medium term, filling a gap in the market between the traditional private residential version using its longer-term contracts, greater pricing and inflexibility, and the serviced apartment version, which again can be rather expensive”.