Asia Co-living Trend Fuelled By Care and Share Millennials

The Millennial move towards communal living it seems - is opening up opportunities for real estate developers and investors in Asia’s busiest cities.

The new age term used to describe a living arrangement that is something more than shared space, is growing most notably in China and Hong Kong – perhaps not surprising given, its status as the world’s most expensive housing market.

Typically, a co-living facility will offer tenants bedroom units but also shared facilities such as roof terraces and gardens, pool and gyms. But there’s also the social aspect feeding into this age demographic shift; some facilities have a manager to organise events. As well as convenience and community, co-living facilities also offers more affordable rental rates than an individual apartment.

Hong Kong is already setting a development benchmark with a number of co-living initiatives underway. Hotel owners in some instances have been converting underperforming hotels to co-living facilities. As a market comparison - an owner of residential building could boost net operating income yield by 400 basis points if it was converted to a co-living facility, while a hotel’s conversion could boost the NOI yield by 300 basis points, clearly adding substantially to a building’s value.

In China, the co-living trend fits supremely well with Beijing’s desire to build a residential rental market to boost labour mobility by allowing graduate workers to live in first tier cities such as Shanghai, where property costs have soared.

Operators such as You+, 5Lmeet and Mofang Gongyu – which has received funding from Warburg Pincus – house thousands of tenants in hundreds of buildings.

Their business model is underpinned by two factors: firstly support from the Chinese government and secondly the opportunity to reposition older or underused buildings.

In Singapore, affordable public housing is available to a large portion of the population and perhaps due to this, there is only a small portion of rental housing or co-living establishments, according to Regina Lim, Head of Capital Markets Research – Singapore at JLL.

Some Singaporean companies are nevertheless testing the water: CapitaLand’s serviced residence unit, The Ascott Limited, has created a new co-living brand ‘lyf’, which claims to be “designed and managed by millennials, for millennials.” Five properties across China, Singapore and the Philippines are slated for opening from this year to 2021.

In Tokyo meanwhile, vanguard developers are also dipping their toes into this new market segment. Apartment space is pricey in the capital, but years of deflation have been good for renters and so far the city has seen the development of only a few co-living spaces. Roam, in Akasaka, offers tenants a 340 square foot room with a balcony.

Shared spaces include a co-working space, multiple meeting rooms, a circus themed workout and Yoga room, and a shared commercial kitchen. Rooms can be leased for as little as a day and with a monthly cost of around US$3,000, Roam – which also has facilities in Miami, London and Bali – is closer to a serviced apartment than a space for long-term living.