The co-living industry in Singapore is rapidly growing beyond its infancy stages to become a mature market. A report on the sector released by JLL states that post-pandemic, the co-living market in Singapore is becoming more stable with a wider variety of occupiers, including expatriates as well as locals.
The report, which is titled “Co-living in Singapore It’s here to remain” describes the current co-living environment in Singapore and the key players and shakers in the industry, the investment flows that fuel the growth, and the obstacles that co-living stakeholders confront.
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This follows on from a report from JLL that was titled “Co-living in Singapore Co-living in Singapore: Living communally at your own convenience” that offered a look at the rapidly growing co-living market as a possible alternative to traditional living alternatives in Singapore.
Co-living isn’t a distinct design type in Singapore. According to URA’s land-use rules, the majority of co-living areas employ residential, serviced apartment or hotel property kinds. So, co-living spaces are incorporated in the guidelines for planning as a marketing term that is used to describe developments with communal spaces and living spaces which offer a variety of programs for community bonding and social interaction.
The length of stay that is required for any co-living space in Singapore is determined by the property types and zonings they belong to. The shortest duration is for co-living properties classified as hotels, which are rented out at a cost per day. These units must have the minimum size of 118 square feet.
Co-living spaces in the space of a serviced apartment must require a minimum stay of seven days, and the unit must be 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 minimum size of 377 sq feet.
In Singapore the co-living market has adapted to a change in the preferences of consumers and expectations for accommodation. This has led to a change in the design and layout of co-living spaces and apartments, according to Chia Siew Chuin, director of research on residential properties, JLL Singapore.
“There is a growing trend toward more private rooms that come with kitchenettes with washer-dryer, ensuite bathroom, and television. This is in part driven by a growing focus on hygiene, personal health and wellbeing as well as the desire for more privacy and comfort in co-living communities,” she states.
One example is the newest entry Weave Living that launched its first co-living service within Singapore during March. It launched Weave Suites -located in Midtown in the storied Kampong Glam area. It is a 65-room apartment that has a serviced property is located in a row of 17 conserved two-story shops in Jalan Sultan.
Apart from the option of six layouts for units Each room is private with living areas that are fitted out but there’s the emphasis on communal spaces and facilities like a fully equipped kitchen as well as gym facilities and hot desks in the lower floor.
Chia observes that private rooms typically have a higher price tag than traditional co-living arrangements that typically feature more shared spaces and 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 adapt to the evolving demands and preferences of their people living there,” 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 director of investment sales for Asia Pacific, at JLL Hotels & Hospitality Group. “The Singapore co-living market has seen significant changes in the last years in the form of mergers and acquisitions being a standard strategy for major players seeking to increase their market share as well as reach potential customers who are not yet there,” She says.
For instance the Hong Kong-based co-living company Dash Living bought over local operator Easycity in the year 2020. This was a smart move which allowed the company based outside of Singapore to enter Singapore. Singapore market.
Local company The Assembly Place also acquired The Assembly Place also acquired 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 operated by its co-living arm Commontown Singapore, totalling approximately 120 rooms. This assisted The Assembly Place consolidate its market share as well as expand the quality of its accommodations.
Another local brand, 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 and remain in the forefront of a fast-growing and transforming industry” Chia says. Chia.
She says that as the interest in living cos continues rise the prospect of mergers and acquisitions are likely on the horizon for companies looking to expand their reach and offer accommodation.
Stakeholders and players
In the JLL report according to the JLL report, there are around 20 active co-living companies on the Singapore market, and around 9000 co-living spaces in the market for accommodation. This number includes strata units leased by owner to the co-living operator who oversee on behalf of the owners.
JLL research shows that the three biggest co-living companies in Singapore in terms of the number of units under management as well as on the horizon include: real estate management service company LHN Group’s brand Coliwoo The Assembly Place, a start-up company; The Assembly Place; and another brand that is homegrown Bespoke Habitat.
Together the three companies make up around fifty% of the overall supply of co-living in Singapore. Other prominent companies comprise Hmlet, Cove, Dash Living and Myposhpad. Furthermore, the presence of co-living companies that are supported by established developers or hospitality organizations can result in a fierce competition within markets in the area. 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 choices”.
She also says that JLL is tracking nearly 800 more co-living units that are scheduled to be launched between 2Q2023 until 3Q2023, and anticipates as high as 2,100 new co-living units to hit into the market by the end of the year.
The government appears to be supportive of the growing 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’s situated in a 14186 square feet area that has a gross floor area of 18,367 sq feet. It has been renovated to residential (co-living) usage.
The tender was closed on April 26. The outcomes are scheduled to be announced before the end of July. The website of the SLA website the tender was closed on April 26. There were 16 bids and the bid rents vary from $7,250 per month up to the highest that of $688,000 a month which was put forward by the 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 companies have chosen to stay in those in the Central Region and some city-fringe areas like River Valley, Geylang and Little India, due to their close proximity in proximity to CBD. These are attracted by young professionals who are more price-conscious, but they also want the convenience of living, according to Chia.
According to JLL, the soaring demand for co-living is due to short-term market disruptions as well as intervention measures taken from the state. “The regulations and pandemic have led to a temporary increase in demand for co-living because of short-term imbalances in Singapore’s residential market dynamic,” says Chia.
For instance, pandemic-related construction delays which fuel demand for temporary leasing from residents of the area and those who are long-term residents. “Co-living leases are a popular alternative for temporary solutions as they provide tenants flexibility with the option of renewing their leases monthly,” says Chia, saying that this type of demand will likely be temporary as the majority of the projects that are affected due to delays are scheduled to be completed before the end of the year.
The rising cost of renting and the increasing interest rates are weighing out some homeowners and renters. The research conducted by JLL shows there is evidence that the private property costs in Singapore have increased by around 20.1% over the past two years, whereas rents in prime areas have risen by 42.5% over the same time.
Furthermore to that, a “prohibitive” additional stamp duty on overseas buyers implies that those who had planned to purchase a house in Singapore might have to keep renting a home at the very least for a short period Chia explains. 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 people who aren’t able to commit to long-term lease agreements,” she says.
Rising allocation of investment
In Singapore the market for co-living has demonstrated a solid cashflow stability and operational resilience, able to ride out the pandemic, according to Tan. “The potential of the market of co-living in Singapore is far beyond the scope of temporary demands. The structural shifts indicate that the demand for co-living space will continue to increase over the medium-to-long time,” she says.
For instance, the attitudes toward homeownership are slowly shifting to the side of renting, especially for couples and younger professionals. Additionally, a rise in the population of expatriates is expected to boost the short-term rental market, according to Tan.
This is why the sector is drawing more attention and capital allocations from investors like private equity funds family offices and real estate developers co-living operators, and funds for institutional investors.
Co-living operators and investors are expected to earn high operating margins ranging from between 65% up to 85% because of very low staffing ratios as well as an industry that is characterized by extremely minimal vacancies, claims Tan. “Despite the steady income and low levels of vacancy, many investors still see co-living as one of their value-add investment strategies, and have an expected internal return of between 15% to 18%,” she says.
This attitude to investing originates from the infancy of the co-living industry in Singapore. “The absence of any existing built-to-rent properties also means that investors will have to accept the risk of conversion to transform commercial buildings like hotels into co-living facilities,” says Tan.
As the industry expands over the next few years, JLL expects co-living assets to earn a higher rate 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 with stable efficiency and liquidity are expecting the returns that have been stabilised for co-living to become similar to the expectations that are typical for office properties” Tan adds. Tan.
The future holds challenges
In order to reduce risk for the investment in co-living spaces, Tan says that many private equity investors are in search of underperforming hotels in the region, which they could transform into co-living facilities or seeking to co-invest with regional and local operators.
Converting hotels with poor performance into co-living areas has been success at Hong Kong and investors there are looking towards Singapore to replicate the same model, in which they see huge growth opportunities, according to Tan.
Joint ventures have made a impression in Singapore like the launch of Weave Living in March. The operator based in Hong Kong bought the property which was formerly known as Clover Hotel Clover by way of an 80:20 partnership with the mainboard-listed construction company SLB Development.
But the absence of appropriate assets, in addition to an unreliable legal and regulatory environment, could hamper this business over the long term Chia says. Chia.
Chia says that the absence of greenfield development sites in Singapore implies that operators are forced to convert commercial hotels, shophouses, and other assets into co-living properties. The acquisition of residential properties to expand isn’t economically feasible because of the high capital value in Singapore Chia adds. Chia.
Players like Figment have been able to make it their business to restore historic shophouses and lease the buildings for residential use. LHN Group has boosted its portfolio by acquiring commercial properties and, in turn, co-living conversions.
It is also not clear what the government’s plans are for the regulatory and legal structures that govern co-living properties. Minimum stay requirements that are linked to land zoning and also limits on the size of kinds of housing may need to be revised in line with the development of the co-living industry as it is now, says Chia.
In the future, she believes her prediction is that when the marketplace 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 winds that are driving the medium-to-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 a larger and more diversifying pool of investors and buyers,” says Chia.