The co-living market in Singapore is rapidly growing beyond its infancy stage into a more mature market. A report on the sector released by JLL says that post-pandemic the co-living market in Singapore has grown more solid with a wider variety of occupier profiles, which includes expatriates as well as locals.
The report, which is titled “Co-living in Singapore is here to remain” provides an overview of the present co-living scene in Singapore and the key actors and shakers within the industry, the investment flows that are fueling the growth and the obstacles that co-living stakeholders have to face.
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This is based on a report from JLL named “Co-living in Singapore co-living: living communally at your leisure” The report offered a look at the rapidly growing co-living market as a possible alternative to traditional housing alternatives in Singapore.
Co-living isn’t a distinct design type in Singapore. In URA’s land use policies, co-living areas employ residential, serviced apartment or hotel property kinds. Therefore, co-living is a concept in the guidelines for planning as a marketing term that is used to describe developments with communal areas and living spaces that provide various programs for community bonding and social interaction.
The minimum duration of stay for any co-living space in Singapore is determined by the specific property types and zonings they belong to. The shortest period is for co-living properties that are classified as hotels that can be rented at a cost per day. They must be the minimum size of 118 square feet.
Co-living spaces in the space of a serviced apartment must are required to have a minimum staying for seven days and an area of at least 377 square feet. Residents who live in co-living spaces within residential property are required to adhere to the most lengthy minimum period of at least 3 months, and the unit’s minimum size being 377 sq feet.
In Singapore the co-living market has been able to adapt to changes in preferences for consumers and their expectations regarding accommodation. This has led to changes in the design and layout of modern co-living rooms and apartments, according to Chia Siew Chuin, director of research in residential, JLL Singapore.
“There is a trend toward more private rooms that come with a kitchenette with washer-dryer, ensuite bathroom, and television. This is in part driven by a growing importance placed on hygiene, personal health and well-being and the desire for more privacy and comfort in co-living communities,” she says.
A good example is the latest entry Weave Living that launched its first co-living offering on the island of Singapore during March. It launched Weave Suites -situated in Midtown in the storied Kampong Glam neighborhood. This 65 room serviced property is situated in a contiguous row of 17 two-storey shops in Jalan Sultan.
Apart from offering the option of six layouts for units The rooms are largely private with living areas that are fitted out however, there is an emphasis on communal areas and amenities like a fully-equipped kitchen as well as gym facilities and a hot desk located on the ground floor.
Chia says that private spaces tend to be more expensive than conventional co-living arrangements, which usually include more shared spaces as well as facilities, but fewer rooms that are self-sufficient.
In general the operators are quick to recognize the requirements of guests. “We anticipate that co-living services will remain evolving as operators strive to satisfy the ever-changing demands and preferences of their the residents of their communities,” says Chia.
Consolidation in the sector
However the image of operators has drastically changed over the past few months, says Tan Ling Wei, senior vice president, investment sales Asia Pacific, at JLL Hotels & Hospitality Group. “The Singapore co-living market has seen significant changes in the last years as mergers and acquisitions are being a standard strategy for companies looking to increase their market share and connect with potential customers who are not yet there,” the executive says.
For instance the Hong Kong-based co-living company Dash Living bought over local operator Easycity in the year 2020. It was a move of strategic importance which allowed the company based outside of Singapore to enter Singapore. Singapore market.
Local company The Assembly Place also acquired The Assembly Place also purchased the property belongings of Libeto which is a different Co-living company based in Singapore, which was founded in 2020. The deal also included properties that are managed by its co-living division, Commontown Singapore, totalling approximately 120 rooms. This assisted The Assembly Place consolidate its market share as well as expand its offerings in terms of accommodation.
Another brand from the country, Hmlet, was acquired by European co-living firm Habyt by 2020. It was a deliberate move by Habyt, a European company to expand into the Asia Pacific market and become an international player that is more competitive.
“Overall the trend toward consolidation within the co-living market can be explained by the necessity for companies to gain economies of scale while remaining at the top of their game in a rapidly expanding and changing industry,” Chia says. Chia.
She says that as the demands for living spaces in co-living continue rise More mergers and acquisitions are likely on the horizon for companies looking to increase their presence and offerings for accommodation.
Stakeholders and players
In the JLL report according to the JLL report, there are around 20 active co-living operators on the Singapore market, and around 9,000 co-living units in the market for accommodation. This number includes strata units leased by proprietors to operators of co-living who control on their own behalf.
JLL research shows that the three biggest co-living companies in Singapore according to the the number of units under management as well as on the horizon include: real estate management company LHN Group’s brand Coliwoo The Assembly Place, a start-up company; The Assembly Place; and another brand that is homegrown Bespoke Habitat.
In total they represent approximately fifty% of the overall supply of co-living in Singapore. Other noteworthy companies are Hmlet, Cove, Dash Living and Myposhpad. Furthermore, the presence of co-living brands funded with traditional developers or hospitality companies creates a fierce competition in this market. A good example is the lyf brand from The Ascott.
All in all, Chia says that the Singapore co-living market is “increasingly competitive and creative, which bodes well for people seeking affordable and flexible housing alternatives”.
She says JLL is tracking nearly 800 additional co-living units scheduled to be launched between 2Q2023 until 3Q2023, and anticipates as high as 2,100 new co-living units will be on into the market by the end of the year.
In the present, the government appears to be in favor of the development of the co-living market. In March, the Singapore Land Authority (SLA) has launched a tender to secure renewal of a five-year lease on an owned by the government property located at between 79 and 95 Hindoo Road in March. The property is comprised of 18 apartments located in a 1920’s two-storey building. It is situated in a 14186 square feet lot that has a gross floor area of 18,367 sq feet. It has been renovated to residential (co-living) usage.
The tender ended on April 26, and the result is expected to be published at the end of July. The website of the SLA website there were 16 bids submitted and bid rents range from $7,250 per month up to the highest that of $688,000 a month that was submitted by construction company Eco Energy.
Other state-owned properties currently used to co-live include Hmlet Cantonment, located at 150 Cantonment Road, and Coliwoo Keppel located at 1557 Keppel Road.
The majority of co-living providers have decided to stay in their Central Region and some city-fringe areas like River Valley, Geylang and Little India, due to their closeness and proximity to CBD. These areas are more attracted by young professionals, who are more price-conscious but also appreciate convenience, according to Chia.
According to JLL the increase in demand for co-living is due to short-term market disruptions and interventions of the federal government. “The regulations and pandemic are causing a temporary demand for co-living owing to temporary imbalances in Singapore’s housing market dynamic,” says Chia.
Examples include construction delays caused by pandemics that drive need for interim leases from residents of the area and those who are long-term residents. “Co-living leases are a popular temporary option as they provide tenants flexibility with the option of renewing their leases monthly,” says Chia, noting that this source of demand will likely be temporary as the majority of construction projects affected due to delays are scheduled to be completed at the end of the year.
Rising rental rates and high interest rates are weighing out some homeowners and renters. The research conducted by JLL suggests the fact that residential property rates in Singapore have increased by around 20.1% over the past two years, and rents in prime areas have risen by 42.5% over the same time.
Furthermore an “prohibitive” additional stamp duty on overseas buyers implies that those who had planned to purchase a house in Singapore could be forced to continue living in rental homes at a minimum in the short-term Chia says. Chia.
“Co-living helps fill the void in the rental market that is crowded and is now a popular alternative that provides an affordable and flexible living arrangements for those who are unable to sign long-term rental contracts,” she says.
Rising allocation of investment
In Singapore the co-living market has demonstrated robust cashflow stability as well as operational resilience, able to ride out the pandemic says Tan. “The potential of the market of co-living in Singapore is far beyond the scope of temporary demand-driven factors. Structure shifts suggest that demand for co-living apartments will continue to rise over the medium-to-long time,” she says.
For instance, the attitudes toward homeownership are slowly shifting to the side of renting, especially among couples and younger professionals. Additionally, a rise in the number of expatriates is likely to help bolster an improved short-term housing market, according to Tan.
This is why the industry is attracting more attention and capital allocations from investors like private equity funds family offices as well as real estate developers co-living operators, and funds for institutional investors.
The majority of co-living owners and investors are expected to earn impressive operating margins of up to 65% or 85% because of the relatively low ratio of staffing and an industry that is characterized by extremely minimal vacancies, according to Tan. “Despite the steady income and low levels of vacancy, many investors still see co-living as a part of their value-add strategies for investing, with an expected internal return of between 15% to 18%,” she says.
This attitude to investing is a result of the relatively new state of co-living in Singapore. “The absence of any existing construction-to-rent buildings also means investors will have to be willing to take on the risk of conversion in order to transform commercial buildings such as hotels to co-living areas,” says Tan.
However, as the market grows over the next few years, JLL expects co-living assets to fetch a higher yield that ranges between% to 5% as compared against traditional office properties, which tend to be stable at around 3.5% to 4%.
“As the market matures which is resulting in stability in efficiency and liquidity anticipate the returns that have been stabilised for co-living assets to be akin to the expectations typical office asset returns” Tan adds. Tan.
New challenges are on the horizon
To reduce the risk of the investment in co-living spaces, Tan says that many private equity investors are looking for low-performing hotels in the region that they can transform into co-living facilities or seeking to co-invest with regional and local operators.
Converting hotels with poor performance into co-living spaces has proven effective for Hong Kong and investors there are now looking to Singapore to replicate the same model, in which they see huge growth opportunities, according to Tan.
Joint ventures have made a impression in Singapore including the launch of Weave Living in March. The operator based in Hong Kong purchased the property which was formerly known as Clover Hotel Clover via an 80/20 joint venture with the mainboard-listed builder SLB Development.
But the absence of the right assets, in addition to a hazy legal and regulatory framework could hamper this business in the future Chia believes. Chia.
Chia explains that the absence of greenfield development sites in Singapore implies that operators have to transform commercial shops, buildings and hotel assets into co-living properties. The acquisition of residential properties for expansion isn’t financially viable because of the capital value of Singapore Chia says. Chia.
Players like Figment have established themselves as a caller to restore historic shophouses and lease the buildings for residential use. LHN Group has boosted its portfolio through acquisitions of commercial properties and, in turn, co-living conversions.
In the end, it’s not clear what the government’s plans are for the regulatory and legal structures that govern co-living properties. The mandatory minimum stay durations, which are dependent on land zoning and also limits on the size of kinds of housing may need to be revised to accommodate the growth of the co-living market in this regard, according to Chia.
In the future, she believes she believes that, as the industry grows and more players enter the market the possibility of further consolidation and standardisation are likely to be observed, which will result in higher efficiency and scale.
“The wind-chills that drive medium- and long-term rental demand, increased transparency of the regulatory system as well as a better awareness and acceptance of co-living as a feasible housing option can further boost the confidence of investors and draw an even larger and varied pool of potential capital and buyers,” says Chia.