Exploring Co-Living And Is It Investable?

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Data technology interfaces, proptech and future of work are the latest buzzwords in the real estate sector. However, they are merely enablers in an environment that are being influenced by millennials at a frenetic pace.

Millennials are the true disruptor and bigger than any other trend!

Already millennials are junking the age-old conventions of usual working profiles and putting down roots in a particular location or city. They are the ‘digital nomads’ of today.

Their integration and participation in the global workforce have already up-ended conventional office formats and coworking has spread like wildfire. It is the sense of community, kinship and social interaction that is now finding resonance in the concept of ‘co-living’.

But these are not just passing trends. There is a sense of economics, independence and creating a diverse, social circle that are driving these alternative working and living concepts.

Co-living, in essence, is a curated, shared living space managed by an operator who pays greater attention to the community he is creating within the space. Designed with interactive common areas, all the security measures and monitoring devices, these are essentially a rental accommodation with a modern twist.

While not explicitly advertised, the target is the younger generation, which is keen on creating multiple communities within its social life.

Beyond all the community living noises, comes the rational concept of affordability. For students, young, unattached professionals who are looking to move between cities and even countries, these could end up being more affordable while retaining the flexibility of smaller duration contracts and a hassle-free, maintenance and upkeep as part of the deal.

The ease of a single licence fee or cheque covering the stay and utility bills, near zero deposit and flexible lease tenures and no furnishing costs are the highlights of experiencing a co-living environment. The mutually agreeable living mates and community gatherings are an added bonus thrown in.

With the rising population of young professionals and students in key global cities such as Hong Kong, Singapore, Sydney and others around the world, co-living as a workable model has been gaining momentum over the past 2-3 years.

There are many well-known firms who are creating a portfolio of such co-living properties. Most of these firms are still local to their cities and communities. Some of the well-known names are WeLive, Common, YOU+ in China, Campus Hong Kong etc.

In fact, there are four operators in India as well – a couple of them being coHo.in based out of NCR and Netsaway in Bangalore. India has a huge student population and over 42% of its population falls in the 18 to 34 student and young workforce demographics.

Keeping in mind the fact that its metros are quite expensive locations, especially cities like Mumbai, where buying houses is prohibitive and even rental accommodation does not come cheap and has a lot of riders attached it, this concept has huge significance in the larger cities of the country.

Already some operators run a healthy co-living accommodation inventory and have found good traction from the young workers and students.

This is still an evolving concept globally and so investment activity is only in its infancy.

But this asset class does offer low entry barriers due to its evolutionary phase and investors could look at increasing their rental yields by a good 12 to 15%, which can be increased further by using leverage.

However, scale is a key element. Most of the co-living developments are spread over small or mid-sized buildings with an adequate number of rooms.

There would be additional expenses needed for renovations, furnishings and upkeep. Also, risks associated with smaller tenancies, local licencing laws would be critical factors in determining the viability of the asset class.

Though relatively an infant, this concept has its roots in the rental housing concept and if situated ideally near emerging industry areas, educational hubs and city centres by refurbishing older structures, has the ability to provide affordable and flexible living options for the millennials while proving to be an adequate return generating asset class.

Watch this space closely!

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