• Investing in Co-Living Spaces in Asia: A Complete Guide

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    Co-living has become a new big trend in Asia and it’s predicted to transform the real estate markets in many countries.

    Everything from established developers to individual investors try to find ways to profit from this growing industry.

    Yet, before you decide to invest in co-living spaces, you must understand how the business model works practically and which countries that should be of interest in Asia.

    In this article, I explain what co-living spaces are, how it works when investing in co-living spaces, about the markets in the most interesting countries, and more.

    What is a co-living space?

    Co-living spaces are often started by companies who partner with local property owners to reduce leasing costs, to share the profits and financial burden.

    Not rarely, these companies receive funding from investors to start or expand operations.

    When a company has bought or leased parts of- or a whole building, they refurbish the units and install the modern amenities and utilities needed.

    The units are small and with sizes of around 9 to 25 square meters with simple, but modern furniture like a bed, a desk and a private bathroom.

    Here, the idea is to spend time in the common areas, to socialize, and to engage in activities within the community. Many choose to live in co-living spaces to grow their network and to develop as persons.

    Typical tenants are young persons who just arrived or that plan to stay short-term and cannot sign rental contracts stretching over 12 months.

    That said, you also find locals who opt-in for co-living as it’s convenient and comparably cheap.

    Is it expensive to live in a co-living space?

    In theory, tenants will save money by living in a co-living space, thanks to the many utilities and amenities included.

    They get access to gyms, libraries, kitchens, terraces and sometimes movie rooms.

    The rents are also low considering the central locations. At the same time, tenants share the costs for utilities. Cleaning services are also included.

    Often, tenants spend less or nothing on gym subscriptions, transportation costs, electricity, and water bills.

    Another noticeable benefit is that tenants can stay for periods as short as 1 day, or longer if they prefer.

    And you often don’t need to pay any deposit either. Simply put, it’s easy to come and go.

    Co-living spaces are not dormitories or shared flats

    Worth mentioning is that co-living spaces are not dorms, where 8 to 12 persons share bunker beds when traveling.

    The communities are sophisticated and companies select each tenant carefully. For instance, there are often age restrictions saying that tenants must be aged between 18 to 60.

    Thus, co-living spaces are built for young professionals to interact and network.

    Recently, some companies (I won’t mention any names) have started to rent apartments from landlords and promote these shared flats as co-living spaces.

    This is also false and shared flats don’t fall under the definition of co-living spaces.

    Creating a strong community in a co-living space

    It’s important to create a strong community within the space, a reason why operators hire managers to arrange activities and to keep the community together.

    A noticeable difference of staying in co-living spaces compared to regular apartments is that you don’t need to sign up for long-term contracts.

    All communication is handled directly with the operator, no separate agents are involved.

    Asian developers now offer co-living services

    Increasingly more developers around Asia, especially in China, have become highly active in building and managing co-living spaces.

    The advantage is that they don’t need to lease the property to a separate company, but can manage the operations on their own.

    For example, the Singapore based developer CapitaLand has even started to offer co-living solutions through its international lodging owner-operator Ascott.

    The co-living brand is called Lyf and can be found in Singapore, Philippines, Thailand, China, and Japan.

    Co-living space business model

    The business model is simple and you earn money from the rents and extra services provided to tenants.

    The outgoing costs cover expenses for the lease, salaries to employees, maintenance and the management of the building. Simple mathematics.

    As mentioned, if you’re short of financing, it can be beneficial to team up with a local partner or with the property owner, to reduce the financial burden.

    With that said, co-living is proven to be more cost-efficient for landlords and property owners, compared to the traditional residential model.

    This is one of the reasons why the market has grown much recently and will continue to do so in the coming years.

    Co-living vs traditional residential rentals

    One key difference between co-living spaces and traditional residential rentals is that co-living service providers generally sign up for longer leases. The leases often range up to 5 years at a time instead of a year or so.

    After, they shoulder the responsibility to act as property managers, letting agents and building managers at the same time.

    Jones Lang LaSalle (JLL) claims that it saves landlords 25% of ongoing costs.

    As the co-living service provider takes care of most of the work, the landlord will be able to reduce the number of operators otherwise needed.

    Let’s say that you own a building somewhere around Asia. First, you’d have to pay a property manager to collect rents and to manage the maintenance of the units.

    You also need to pay a building manager to manage the services and maintenance of common areas. A leasing agent would also pocket fees when acquiring a new tenant.

    In the co-living industry, operators act as all three and landlords don’t have to pay for these costs.

    The co-living space market in Asia

    The co-living industry will grow in Asia in the coming decade, especially in markets with big younger populations.

    It will also grow in countries where property is in short supply or unaffordable housing.

    Let’s have a look at the co-living space market in different Asian countries and what sets each country and region apart.

    China (Mainland)

    China has one of the biggest and most promising co-living space markets in Asia. It was also one of the earliest adopters and we saw co-living spaces popping up in 2012.

    Co-living spaces have become successful in China since the government tries to create a new residential rental market.

    Here, property and rental prices have gone through the roof in the bigger cities like Shanghai, Beijing, and Shenzhen.

    With an urbanizing young population that moves to the bigger cities to find jobs, the government does its utmost to boost the local rental markets.

    Nowadays, you can even find Chinese companies like Tujia that collaborates with developers to plan the interior and exterior of new buildings.

    This is for the sole purpose of using these as co-living or short-term housing later.

    India

    India brings similarities to China, having a big young workforce that needs to relocate to bigger cities.

    The co-living space market will be one of, if not, the biggest here in the coming years.

    Property prices have increased steadily in India and we see a stronger demand for co-living spaces to cater to new graduates and workers in the future.

    Hong Kong

    Hong Kong is one of the most expensive real estate markets in the world. It’s not due to scarcity of land, but rather intentional poor land management.

    The co-living space market is not as big in Hong Kong compared to mainland China or India, but grows fast. The market is fairly new, even if we’ve seen plenty of new service providers recently.

    The main reason why co-living is big in Hong Kong is due to the housing unaffordability.

    Being a business hub, it’s also crucial for interns and expats to live close to the central business districts. These areas are notorious for being some of the most expensive in the world.

    Singapore

    The property market is more regulated in Singapore compared to Hong Kong. Locals have access to public housing, which are called HDB apartments.

    Thus, the co-living space market is not as big here compared to the above-mentioned places.

    Still, Singapore is well-known for taking on early trends and the co-living market grows here too.

    Thailand

    There are significantly fewer options of co-living spaces in Thailand.

    Thailand doesn’t suffer from unaffordable housing and you can live in a condo unit or a serviced apartment at low costs.

    This is not the case in the bigger cities in mainland China, Hong Kong or Singapore.

    Even if we’ve seen several new operators popping up in Thailand, its co-living market is still comparably small.

    The tenants who go for co-living spaces in Thailand are often foreign digital nomads who compliment them with co-working spaces.

    Japan (Tokyo)

    Tokyo has suffered from deflation and rents haven’t increased that much over the years.

    The number of young people don’t grow much either. Instead, Japan’s population is predicted to decrease significantly this century.

    As such, the co-living space market is still small, but you’ll find various co-living operators.

    Having said that, Tokyo and other Japanese cities will not have the same need of co-living spaces as India and mainland China.

    How much can I earn when investing in co-living spaces?

    I added this section to get a better overview of how much you can earn when investing in co-living spaces.

    I’ve selected two different co-living spaces in Asia and made theoretical equations that should be for reference only.

    The Hatchery Place: Co-living space in Subang Jaya, Malaysia

    The Hatchery Place is a small but popular co-living space in Malaysia. It’s located in Subang Jaya, which is around 25 km away from Kuala Lumpur.

    According to its website, they have single rooms that cost 385 RM to 490 RM (USD 92 to USD 117) per week. They also have double rooms, but let’s stick to the single rooms for the calculations.

    Let’s use an average price per room of RM 437 per week (RM 385 + RM 490 / 2 = RM 437).

    The monthly fee will in that case be: RM 437 (USD 104) x 4 weeks = RM 1,748 (USD 416).

    Let’s play with the thought and say that there are 20 such units available and with an average occupancy rate of 75%. That leaves us with 15 occupied units.

    To summarize:

    • Fee per unit / month: RM 1,748 (USD 416)
    • Amount of units: 20
    • Occupancy rate: 75%

    Monthly revenue:

    • 15 rooms x RM 1,748 = RM 26,220 (USD 6,257) / Month

    Let’s neglect the utility costs, but include salaries for 2 staff. A fair estimation is that both employees make RM 6,000 (USD 1,413) in total per month.

    Let’s also assume that the monthly rent is USD 3,000.

    Monthly costs:

    • Salaries (2 persons) + rent = USD 1,413 + USD 3,000 = USD 4,413 / Month

    Profit (Monthly revenue – Monthly costs):

    The revenue minus the outgoing costs are:

    • USD 6,257 – USD 1,431 – USD 3,000 = USD 1,819 / Month

    This is just a simple calculation, but as you can see, the profit potential isn’t that high.

    m3: Co-living space in Hong Kong

    m3 is a co-living space located in Prince Edward, Hong Kong. It’s one of the most well-known brands that’s been featured in newspapers like the South China Morning Post (SCMP).

    The premise has around 40 units, according to the photos of the exterior of the building.

    Rates range from around HKD 9,000 to HKD 12,000 for studios of around 10 square meters.

    So, let’s use an average fee of HKD 10,500 and let’s say that each studio is 10 square meters.

    The units aren’t fully occupied either, we can assume that there’s an occupancy rate of 80%. That leaves us with 32 units and with a unit price of HKD 10,500.

    To summarize:

    • Fee per unit / month: HKD 10,500 (USD 1,337)
    • Size: 10 square meters
    • Amount of units: 40
    • Occupancy rate: 80%

    Monthly revenue:

    • 32 units x HKD 10,500 = HKD 336,000 (USD 42,800)

    Let’s neglect the utility costs but assume 3 full-time employees earn HKD 30,000 in total each month.

    I checked several listings in Prince Edward and the cost per square meter when renting units in the area is around HKD 300 per square meter.

    Let’s also add 200 square meters for common areas and corridors. That leaves us with a total monthly outgoing cost of:

    (HKD 300 x 10 square meters x 40 units) + (HKD 300 x 200 square meters) = HKD 120,000 + HKD 60,000 = HKD 180,000.

    To summarize the outgoing costs (excluding utility fees, maintenance and cleaning):

    • Salaries 3 full time staff: HKD 10,000 x 3 = HKD 30,000 / Month
    • Rent: HKD 180,000 / Month

    Monthly costs:

    • Salaries (3 full time staff) + Rent = HKD 30,000 + HKD 180,000 = HKD 210,000 (USD 26,750)

    Profit (Monthly revenue – Monthly costs):

    The net profit (excluding utility costs, cleaning and maintenance) would be:

    • HKD 336,000 – HKD 30,000 – HKD 180,000 = HKD 126,000 (USD 16,050) / Month

    Again, keep in mind that this is a simple theoretical calculation and just to get a rough overview.

    Best places to invest in co-living spaces in Asia

    Before you decide to start or to acquire a co-living space, you first need to understand the local foreign property ownership regulations.

    Sure, India and China are two of the biggest markets. But, it’s difficult to do business here and to get hold of real estate, unless you’re a permanent resident or citizen.

    In India, foreigners cannot own property unless they are permanent residents. If you’re a non-resident, you can only lease property for up to 5 years.

    Consequently, India is not your best option when investing in co-living spaces.

    China brings similarities to India and it’s not the easiest place to get hold of property or to do business as a foreigner.

    Instead, you should look at developed markets and preferably where there’s a big demand for co-living due to unaffordable housing.

    Some of your best options when investing in co-living spaces in Asia are:

    • Hong Kong
    • Singapore
    • Japan
    • Korea
    • Malaysia

    The initial costs might be higher here, but you’ll also be able to charge higher rental fees, which in turn can increase your cash flow.

    List of Co-Living Spaces by Country and Region

    Below you can find some of the most popular co-living spaces in different Asian countries and regions.

    Hong Kong

    Weave
    • Locations: Prince Edward, Hung Hom
    • Unit Size/Type: 9 to 12 square meters
    • Fees: From 6,900 HKD / Month
    • Website: Click here
    The Bibliotheque
    • Locations: Kowloon
    • Unit Size/Type: Shared rooms (dorm)
    • Fees: From HKD 3,000 / Month
    • Website: Click here
    Campfire
    • Locations: Sham Shui Po
    • Unit Size/Type: Unknown
    • Fees: From HKD 9,000 / Month
    • Website: Click here
    The Nate
    • Locations: Tsim Sha Tsui (Nathan Road)
    • Unit Size/Type: 11 to 14 square meters
    • Fees: From HKD 15,000
    • Website: Click here
    m3
    • Locations: Prince Edward, Tsim Sha Tsui, and Sham Shui Po
    • Unit Size/Type: Around 10 square meters
    • Fees: From HKD 4,500
    • Website: Click here
    Studio Studio
    • Locations: Wan Chai
    • Unit Size/Type: 9 – 25 square meters
    • Fees: From HKD 6,000
    • Website: Click here

    Singapore

    Hmlet

    • Locations: Multiple locations
    • Unit Size/Type: 1-2 Bedrooms
    • Fees: From SGD 1,100
    • Website: Click here
    Easycity
    • Locations: Pasir Panjang road (3 locations)
    • Unit Size/Type: Unknown
    • Fees: From SGD 800
    • Website: Click here
    Login Apartment
    • Locations: Queenstown, Novena, East Coast, Orchard Road
    • Unit Size/Type: Junior and Master Bedrooms
    • Fees: From SGD 1,200
    • Website: Click here
    CP Residences
    • Locations: Orchard Road, Beach Road
    • Unit Size/Type: Lite Rooms to Penthouses
    • Fees: From SGD 1,400
    • Website: Click here

    Bangkok

    LITA
    • Locations: Din Daeng district
    • Unit Size/Type: Studios and Dormitory
    • Fees: From THB 1,150
    • Website: Click here

    Tokyo

    Chapter Two
    • Locations: Asakusa
    • Unit Size/Type: Single Pod, Twin Private Rooms, 4 Beds Private Room
    • Fees: From USD 32 / night
    • Website: Click here
    Port House
    • Locations: Shibuya
    • Unit Size/Type: 1 Bedroom
    • Fees: Unknown
    • Website: Click here

    Seoul

    Localstitch
    • Locations: Daeheung
    • Unit Size/Type: 1 Bedroom
    • Fees: USD 700 / Month
    • Website: Click here

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