The Rise of a New Way of Living: Investing in Co-Living Spaces
Investing in co-living spaces is quickly gaining traction among professionals who want to live at the heart of urban areas without sacrificing comfort. Co-living spaces give their residents a unique blend of private and community-oriented living.
The appeal of co-living spaces like the co-living space in Pasay City is the potential it has. As more jobs become available in Metro Manila, the demand for affordable housing that meets one’s lifestyle has only continued to grow. This type of living arrangement is an investment option that’s attractive because of its potential for high returns.
What is Co-Living?
Co-living or “collaborative living” is a modern housing concept that combines private living areas with shared common spaces. While humans have always co-lived with one another throughout history, modern co-living began in the UK and US. This made it easy for residents to live, work, and socialize in communal spaces.
The rise of co-living spaces can be attributed to the new generation of professionals who want to reside in spaces that are convenient, affordable, and with a sense of community. Co-living spaces fulfill all of these especially compared to traditional homeownership.
Co-living setups usually involve individual rooms with communal areas such as kitchens, lounges, and entertainment hubs. These communal spaces allow residents to meet their fellow residents and foster communities, which is important for people who live alone in the area.
Co-Living Trends in the Philippines
In urban hubs like Metro Manila, Cebu, and Davao, the co-living sector has been steadily growing. The demand for more co-living spaces can be due to the country’s rising population, the growing number of young professionals, and the increased urbanization. Lifestyle preferences also play a role in the shift in the real estate market.
1. The Rapid Urbanization of the Country
The rapid rate of urbanization in the Philippines can also come with an influx of people, as well as population growth. As more and more people come into commerce centers in the Philippines, the higher the demand is for affordable and flexible housing options – and co-living is becoming the solution to that.
Co-living is emerging as a practical solution for individuals to have a space to themselves, while still having various important amenities available to them. This includes a working kitchen, lounges, and coworking spaces. This makes co-living an appealing option especially when considering the community one can find in these spaces.
Additionally, co-living spaces are typically located in key areas, which means that residents of these spaces are at the center of life.
2. The Millennial and Gen Z Influence
The new generation of the country’s workforce, Millennials and Gen Z, are changing their living preferences, which is forcing developers to rethink new developments. These younger generations are choosing homes that provide them with flexibility and a sense of community. Shared spaces like co-living arrangements can meet these needs and help them achieve the kind of living they desire.
Seeing as how this is what the market wants, major real estate developers in the Philippines are taking notes and are starting to integrate co-living concepts into their portfolios.
3. The Rise of Remote Work
Since the steady rise of remote work over the years, the demand for co-living spaces has also increased. Remote work may not give individuals the satisfaction of being able to socialize with coworkers, which can lead to feelings of isolation.
As more professionals move away from traditional office settings, co-living spaces provide them with a place to work, live, and socialize. Some real estate developers have even ensured that coworking facilities are available to their residents, making them ideal for professionals with remote work setups.
What are the Factors That are Driving the Demand for Co-Living Spaces?
Several factors have been driving the demand for co-living spaces in the Philippines, making them an appealing option for both residents and investors:
1. Affordability
Compared to leasing a condo or a home, co-living spaces can be much cheaper. By sharing common areas and amenities, residents can enjoy high-quality facilities and services at a lower cost. This also means that residents don’t need to furnish these spaces, which minimizes the financial resources they need to allocate to set up their home base.
The affordability of these spaces makes them an excellent asset for investors, as this can translate into higher occupancy rates and consistent rental income. Additionally, investing in co-living spaces typically involves a lower investment cost compared to other types of rental properties.
2. Living Flexibility
Unlike traditional lease agreements that typically require at least a one-year contract, co-living spaces often provide flexible lease terms. These flexible lease terms make them much more appealing to young professionals who don’t want to commit to a space long-term, which is why co-living spaces attract a diverse pool of residents.
3. Sense of Community
Property managers of co-living spaces often organize social events, workshops, and activities to build a sense of community among residents. This aspect of co-living can help young professionals develop social connections and a sense of belonging in their home. These networking opportunities also attract new tenants and encourage current tenants to stay.
4. Luxury Amenities
Developers make co-living spaces more attractive by offering a range of amenities and services to residents. These amenities can include pools, gyms, laundry facilities, lounges, and more. This is a major selling point for most real estate developers, appealing to residents who want to have these luxuries just a few steps away from their home.
5. Strategic Locations
Usually, co-living spaces are situated in prime locations near business districts, transport hubs, and entertainment areas. For instance, investing in a co-living space in Pasay City provides its residents with easy access to Metro Manila’s major commercial centers, making it an attractive option for young professionals.
Benefits of Investing in Co-Living Spaces
Investing in co-living spaces offers numerous benefits, particularly in a market like the Philippines, where the demand for flexible and affordable housing continues to grow.
1. High Occupancy Rates
Compared to other types of properties, co-living spaces are much more affordable. They are also located in desirable areas and have flexible lease terms, which is why these spaces tend to have high occupancy rates. High occupancy rates mean steady rental income for investors.
2. Strong Rental Yields
Real estate properties like houses, condos, and apartments may come with amenities but usually carry a hefty price tag. Co-living spaces reduce costs by offering shared amenities and services, enabling them to charge a premium that is still considerably lower than other rental properties in the same central location.
3. Diverse Tenants
The many amenities and clean environment that co-living spaces offer make them attractive to a wide range of tenants, including students, young professionals, and expatriates. This diversity makes investing in co-living spaces more stable because it ensures a broad tenant base.
4. Lower Maintenance Costs
Since co-living spaces are designed with shared common areas and facilities, maintenance costs are often lower compared to traditional real estate rentals. Lower maintenance costs can lead to better cost management and higher yields for investors.
Things to Consider Before Investing in Co-Living Spaces
Before you pull the trigger and invest in a co-living space, there are some challenges and considerations to keep in mind:
1. Market Saturation
As co-living spaces become more popular, the risk of market saturation increases. As an investor, you should carefully consider the demand for these spaces and their supply as well. It’s important to evaluate the location of the project where you plan to invest and see what types of projects are being built in that area. Conducting due diligence can help you avoid investing in a property in an oversaturated location.
2. Management and Operational Challenges
Unlike traditional rental properties, co-living spaces are managed by a team chosen by the developer. This means that you won’t need to lift a finger to manage your property or engage with your tenants. Tenants can also approach any of the building staff if they need help with their property.
While it may seem convenient to delegate these responsibilities, it can be a struggle if you prefer to be involved with your investments. Additionally, these services can reduce your net earnings because the staff’s salaries are an operational expense.
3. Tenant Turnover and Retention
Due to the wide range of personalities and flexible lease terms, co-living spaces may experience higher turnover compared to other types of real estate properties. Fortunately, the building’s staff is ready to help individuals move in and out of the property efficiently.
4. Real Estate Developer
Before you decide to invest in a co-living space, make sure you choose the right real estate developer. The developer can make or break your investment because tenants often consider who developed a property before they commit to leasing. The developer can give tenants an idea of what to expect in terms of service excellence and the quality of the place.
So, make sure you choose the right real estate developer to invest in before you sign on the dotted line. If you’re looking to invest with a developer that’s known for high-quality projects, then Anchor Land may be the best option for you. Contact us today to learn more about the co-living projects we’re developing.