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As one founder puts it, “we are moving towards a combination of real estate, communities, and digital experiences.”
In the sharing economy, the idea of paying guests sharing living space with “roommates” has received a Millennial makeover. It is now called ‘co-living’, and it involves a lot more than split bills.
The entire Asia Pacific region demonstrates a higher inclination towards shared assets, compared to the Americas, Europe, the Middle East or Africa, driven by rapid urbanization, the gig economy boom, and the ensuing need for affordable housing in cities.
Drawing inspiration from the co-working framework, co-living applies the concept of shared assets to the paying guest model, by adding shared communal facilities such as a common kitchen or laundry room, utilities such as housekeeping or WiFi, and co-working and recreational areas as well.
Tenants typically pay rent on a per-week or per-month basis for furnished rooms (that can be shared or single rooms), with or without a lock-in period.
But beyond the facilities, co-living spaces claim to help in addressing the same Millennial desire that drove the social media boom: the desire to stay connected.
Millennials and more
The target market for co-living spaces is the Millennial demographic (also known as Gen Y, individuals born between 1981 and 1996), a large number of whom are found in the Asia Pacific (APAC) region.
Joel Oei, Head of the Ascott’s co-living brand lyf, sheds some more light on this. A co-living space with a presence in Singapore and Thailand, Oei defines lyf as “designed and managed by Millennials, for Millennials and the Millennial-minded.”
“The Millennial segment is the fastest-growing demographic in the region and approximately 58% of the 20- to 38-year-old population in the world reside in Asia,” Oei says, quoting from a Kearney report. “This is a good fit with the lyf brand.”
Though the COVID-19 pandemic has plunged businesses around the world into chaos, lyf remains optimistic. After opening its first property in Singapore in 2019, lyf opened its second co-living property located in Thailand in late July this year, and is looking at six more locations as well as other opportunities in the Asia Pacific region.
“Despite COVID-19, we remain confident in the long-term growth of the region and the value proposition lyf offers,” Oei notes.
Economies in the APAC region are heavily dependent on travel and tourism. Travel accounted for an average of 12.6% of the ASEAN economies in 2018, and this has taken a hit due to COVID-19.
At the same time, Southeast Asia is well poised to capitalize on startup culture, and the startup capital of the world also now lies in the APAC region, in Beijing. So it is not just experience-hungry travelers that co-living spaces are attracting, but entrepreneurs and digital nomads too.
David Abraham, Co-founder of Outpost, a co-living space based in Indonesia and Cambodia, notes, “when people look at destination co-living, their needs are much broader than when they choose a living space in their city.”
Outpost mostly attracts a Western crowd who are “seeking to explore the world, grow personally and professionally, and connect with their surroundings.”
But the co-living space is also seeing interest from Asian customers, namely from Korea, Singapore, Japan, and China, apart from its home base Indonesia.
“When people call us and ask about staying at Outpost, they don’t ask us about the thread count on the sheets or the size of the room–indeed, it’s important to have quality and space–but they are curious [about] who they will meet, or what events are happening,” Abraham says.
“They want to learn about our entrepreneurial, creative, and internationally-minded community,” he adds.
More than room service
Many spaces often host events and focus on building a community. In fact, the idea behind most co-living spaces is not only to provide facilities, but also to create a sense of community through shared spaces.
For instance, Seoul-based nonce started as a blockchain community space, and it eventually expanded to include niche tech such as artificial intelligence and fitness.
“The community [does not have to] be a single homogenous unit at any given point of its life… We bootstrapped from the blockchain community because that was the identity of the co-founders, then we evolved,” says nonce Co-founder and CEO See Eun Ha.
Ha notes that it is important for community-based spaces to be centered around a purpose, and to also fully embrace diversity at the same time.
“The ‘general’ consensus that Millennials are driving the co-living trend is too general in my opinion. It varies from region to region and there are aspects to co-living that’s specific to the culture or situation a particular country is facing,” says Ha.
In South Korea, Ha explains, owning real-estate is a “pipe dream” for Gen Y in South Korea. The high costs of owning real-estate are discouraging, “and that in turn encourages them to share access to decent real estate with others.”
A majority of nonce’s current members are either entrepreneurs or startup employees.
To stay relevant, Ha notes, “co-living has to speak and cater to not only to Gen Y and their needs but also to Gen Z and beyond. We are moving towards a combination of real estate, communities, and digital experiences.”
No two cities or spaces are the same
Co-living trends within the APAC region differ depending on a host of factors related to demographics and pricing, a Knight-Frank report finds.
Singapore, for instance, is a lucrative market for co-living owing to a booming startup culture, and its visibility as a growing tech and financial hub in Southeast Asia, coupled with fairly expensive housing. This last aspect is also what makes Beijing and Hong Kong profitable markets for co-living.
For Perth or Bengaluru, on the other hand, the availability of affordable housing, coupled with a still-growing startup community and moderately sized populations, means that co-living spaces will face tougher competition from competitively-priced independent accommodation.
Another factor that co-living spaces need to consider is the nature of the stay that their visitors are expected to have.
“I see two types of co-living: the lifestyle short-term stay for travelers and digital nomads (which we were doing until now) and the mid/long term stay more suitable for locals and expats,” Co-founder and CEO at Spiced, a Vietnam-based co-working community for creators, Martial Ganiere says.
Spiced earlier provided co-living facilities but decided to move out of the business due to enormous fixed costs of running a co-living space (which Ganiere says requires about 12 to 20 rooms to be viable), training and re-training requirements for hospitality staff, and difficulties in finding the right real-estate partners in Vietnam.
“The pandemic, and the uncertainty as to when digital nomads will be able to travel safely and return, accelerated our decision,” he adds.
Ganiere points out that real-estate developers and investors in Asia lean towards the mid-to-long term co-living model as an alternative to serviced apartments.
“Most [investors] see co-living as serviced bedrooms/studios for long term lease… and no plans for communal space, as they only see revenue stream with rent.”
For Spiced, this would mean competing on price rather than co-living’s core experiential value of “community-centric amenities or activities,” for which he says, there is poor local demand unless spaces target expats or Vietnamese diaspora returning to the country.
“We are a community and co-living was a convenience we offered but it’s never been our main revenue stream,” Ganiere explains. “We’re looking at other ways to serve and scale the community in Vietnam and beyond, and co-living is a slow and costly way to achieve that.”
Heavy-duty costs in the co-living space point to a greater worry. If the WeWork fiasco or Oyo’s ongoing troubles say anything at all, it’s that there is more than one way to kill the proptech goose that lays the golden egg.
At the same time, even Ganiere, who is sceptical of the co-living model in Vietnam, would not rule out the possibility of a future partnership with a real-estate developer or hotel operator.
Co-living spaces are clearly not afraid to pivot for profitability. Yet, co-living is an industry in flux, still exploring what value it truly represents for visitors that it can consistently deliver.
It has not cracked the code yet, but perhaps lessons from co-living can point towards some part of the key to unlocking a proptech revolution.
Header image by Daria Shevtsova from Pexels
The article has been updated to reflect lyf’s launch in Thailand, which took place while the article was in progress