The sharing economy enters the home as rising property prices drive nomadic millennial singletons to seek an alternative to the inflexible rented apartment.
An impromptu foosball game with your neighbour while waiting for the laundry. Cooking classes in a communal Masterchef-inspired kitchen. Movie screenings, board game nights, and in-house yoga and meditation sessions. These are but some of the activities to look forward to if you take up quarters in a co-living facility.
In 2018, Bloomberg named such “adult dorms” as one of the eight telling social trends of the US economy. Their popularity has certainly grown in crowded cities such as London and New York over the past decade. UK-based startup The Collective launched last year what is said to be the world’s single largest co-living development – a 21 storey building with 705 rooms in London’s Canary Wharf. This is already set to be surpassed by an 803-unit compound currently being built in Silicon Valley by San Francisco-based startup Starcity.
In Singapore, co-living took off in a big way only in 2019. The Ascott Limited, CapitaLand’s wholly owned lodging business unit, opened in September its flagship lyf Funan Singapore, which is the largest co-living property in Southeast Asia. Another home-grown co-living operator with a similar impatience with vowels, Hmlet, successfully raised US$40 million (S$53.9 million) in a series B round last July, and announced in October a joint venture with Mitsubishi Estate Co to establish over 10,000 rooms in Japan over the next few years. Spilling over into 2020, Hong Kong-based Dash Living entered Singapore just last month through its acquisition of local start-up, Easycity.
Co-living spaces continue to sprout in virtually every major city in the world, and this trend shows no signs of slowing down.
What exactly is co-living?
Co-living is most easily understood as the housing equivalent of co-working, where residents rent individual apartments, studios or rooms with access to an array of shared spaces and facilities. Similar to serviced apartments, such facilities typically charge a flat rental fee, covering the basics such as furnishings and utilities. However, in line with the shared aspect of co-living, residents at some properties are expected to pick up after themselves when using common facilities, and housekeeping is usually provided on a weekly rather than daily basis. Taking convenience and all costs into consideration, the rent works out to be competitive to that of a similarly sized room in a condominium in the same area.
It has been touted as both a solution to the problem of increasingly unaffordable home prices in developed cities, as well as a practical option for digital nomads who require the flexibility of seamless mobility across cities and countries.
A 2018 PropertyGuru survey found that 39 per cent of millennials (defined here as those between 21 and 37 years of age) still lived with their parents. Among these, two-thirds were looking to buy a home but 69 per cent said that they do not have a structured savings plan to finance such a purchase. Additionally, according to the Department of Statistics, fewer Singaporeans are getting married (and hence, do not require larger homes for raising families) and those who buck the trend, do so later in life.
Helping capture this demographic is the decidedly millennial slant in the recent developments and trends in co-living. Promotional materials are typified by promises of “insta‑worthy” spaces. lyf promotes itself as “a global community of thought leaders” and hosts regular networking sessions and other social activities for its residents, while Hmlet’s “members” are encouraged to “find your tribe” through organised events such as restaurant and bar takeovers.
Co-living makes sense (and cents)
Detractors may dismiss co-living as a passing fad or (more charitably) a niche option for a very specific demographic. However, stripping away the shiny social media-centred marketing, there are two drivers that could give co-living the legs to go the distance in Singapore’s crowded and competitive property market.
First, the movement is underpinned by a sense of community – far from a new or radical concept. Early examples can be found from Yuan Dynasty-hutongs (胡同) to the camps established by hunter-gatherers in the Middle Ages. Closer to home, the older generation would remember kampung living and the communal TV.
While technology now gives us the ability to maintain relationships across continents in real time, the fundamental human need for a sense of belonging will undoubtedly endure. This gives co-living traction and the potential to flourish.
Second, the property market is primed for an upheaval. In 2019, Singapore retained its position as the world’s second most expensive property market, and also found itself in the top‑10 costliest list for those looking to rent. This does not bode well for the state’s drive to be a hub of all things, in terms of attracting foreign talent as well as avoiding a brain drain.
Co-living fills a conspicuous gap within the continuum of home ownership, traditional rentals, and serviced apartments and hotels. Its attractiveness lies in its flexibility, with short three-month minimum commitments (the statutory requirement) in most cases, the option of rolling monthly extensions, doing away with year-long tenancy contracts, and the payment of sometimes hefty security deposits.
On the supply side, different business models are available, each with its own benefits and risks.
According to a JLL-led study carried out last year, most co-living operators choose to adopt an asset-light approach of leasing entire properties and retrofitting them for use as co-living spaces. While this approach allows operators to acquire expand and scale up relatively quickly, retrofitting expenses and fixed operating costs can be hefty, and a Business Times article highlighted the risk that such operators are looking to recover their investments by tapping on revenue from a client base that is, practically by definition, transient and mobile.
The same Business Times article noted that an alternative model is for operators to enter into revenue-sharing models with landlords, where a proportion of turnover is paid instead of fixed rent – this hedges the risk for the operator but at the same time introduces uncertainty to the landlord’s bottom line.
Further options include fully owner-operated developments like lyf Funan Singapore. In exchange for complete control, such a model requires the owner’s significant level of commitment and investment, especially in the case of a development designed and built from ground up for specific use as a co-living facility.
Ultimately, the viability of co-living, as with any business model, will depend largely on the operators’ ability to maximise efficiency and revenues, while at the same time managing their risks and making strategic and well-considered investment decisions.
The future of co-living
In spite of the strides made in the co-living space in Singapore thus far, these are still early days yet. Even including facilities currently under construction, co-living spaces account for less than 1 per cent of the total private housing stock in Singapore.
Nevertheless, given its apparently high demand – the Business Times article referenced earlier reported that occupancy rates hovered around the 90 to 95 per cent mark – co-living certainly has the potential to grow in terms of recognition as an asset class and establish itself as a sustainable business model.
It might well be that success will ultimately lie in the efforts by developers and operators to embrace and develop the sense of community and belonging by occupants of co-living spaces, instead of viewing them as short-term lodgers who can be charged as much as possible for the smallest liveable space.
In that light, perhaps the real challenge is in changing perceptions of co-living as a millennial fad, such that it gains acceptance as a real, viable option for just about anyone in search for a temporary (or even semi-permanent) abode.