Through new research, property consultancy CBRE has discovered that co-living is gaining interest from certain institutional investors and private equity fund managers – as a part of their portfolio diversification and risk mitigation strategies.
Co-living, as an alternative asset class underpinned by solid market fundamentals and resilient demand drivers, has been adapting to cater to numerous renter demographics and new customer profiles. The sector in the Asia-Pacific region has also followed suit.
The sector’s stable long-term rental income yield prospects and asset resiliency has further ignited investor appetite to capitalise on value-add opportunities to strategically calibrate their portfolios, according to CBRE.
In addition, CBRE’s Asia Pacific Investor Intentions Survey 2024 highlighted that vintage credit strategies such as distressed asset and debt solutions continue to gain favour among investors, with most credit strategies focusing on non-performing loans (NPLs) from developers or development loans for the sector.
Aside from growing market demand, numerous lenders are providing construction and/or permanent debt capital to co-living developers and owners given their ‘affordability mandates’, CBRE state.
The acquisition and conversion of underperforming commercial buildings, such as hospitality assets, into co-living developments has been a notable trend that surfaced among institutional investors as part of their aggressive business growth strategy, especially within the Singapore and Hong Kong markets.
CBRE believe that despite the sector still being in its nascency, capital flows into co-living across Asia-Pacific showed no signs of abating over the past few years.
The establishment of a US$600m co-living fund – CapitaLand Ascott Residence Asia Fund II (CLARA Il) – in February 2024 reflects this, targeting co-living opportunities in gateway cities in developed markets across Asia Pacific.
