Converting properties to co-living spaces can push rental yields up by 12.1%

Students and young professionals are seen to be the most receptive to the co-living scheme.

Residential developments stand to gain 12.1% increase in rental yields once they convert their buildings into co-living spaces, according to a research paper from JLL.

Co-living is a modern form of shared housing that provides community aspects for overall wellbeing of tenants like gym classes, film screenings and networking events, which are seen to appeal the most to students and young professionals.

“Importantly, it [co-living] offers those locked out of the housing market an affordable solution to meet their housing needs. At the same time, co-living creates new and exciting investment opportunities in a market segment that has often been overlooked and is typically associated with low quality housing,” JLL said.

In a case study, JLL noted that a residential building that has undergone a one-year renovation period into a co-living space can stand to gain up to $7.68m in annual revenues under the condition of full occupancy.

In a breakdown, JLL estimates that a saleable unit area of 150 sqft, beds will be 60 sqft and 2-3 people will share in the same room and bathroom.

From a monthly rate of $7,000/unit, property owners can charge $4000/bed.

Hotels can also benefit from higher rental yields with a projected $24m in annual revenue once it has undergone the conversion into a co-living space.

“Returns can be further boosted through the use of financial leverage and operational improvements such as increasing performance accountability, streamlining maintenance processes and centralizing data management,” said JLL.

Co-living schemes for the creative industries can be set up in Tai Po, Sheung Wan and Wong Chuk Hang whilst shared spaces aimed for students are best set up in Sha Tin, Kenendy Town, Tuen Min and Hung Hom.

For those targeting affluent professionals and expats, co-living spaces can be similarly established in upmarket residential areas like Mid-Levels West and Island South.

However, property developers should not be quick to jump ship and convert buildings into co-living spaces as it remains largely untested in the local property market.

Moreover, they could face stiff competition from nano flats which measure less than 200 sqft and rent for less than $9,000 monthly.