"Co-living, which satisfies a wide range of housing demand, offers investors in city centers a new opportunity to secure stable rental revenue."
Conal Newland, head of living for Asia-Pacific (APAC) at Cushman & Wakefield (hereafter Cushman), explained in a recent interview why co-living investment is drawing attention. Cushman operates in 60 countries worldwide and is a corporations that provides comprehensive services across the real estate spectrum, including sales, leasing, management, valuation, and advisory.
Co-living is a housing model in which several people live in one dwellings, using bedrooms individually while sharing the living room, bathroom, and toilet. Personal space is smaller than in a typical apartment, but it is competitive in urban location, amenities, and community building. Cushman has been focusing on the rapidly growing demand and investment cases for co-living in the APAC region and is continuously publishing related reports. Based on extensive co-living transaction experience, it is also carrying out co-living development consulting work in Korea.
Even this year alone, several large co-living transactions have been concluded in the APAC region. A representative case is in April when global private equity fund (PEF) manager Warburg Pincus acquired "Tokyo Beta," the largest co-living portfolio in Japan owned by Lone Star. This portfolio has as many as 16,000 rooms. In Korea, sovereign wealth funds GIC invested $450 million (about 662.8 billion won) in global co-living corporations Weave, drawing industry attention.
According to Cushman, investment in the living sector, including co-living, accounted for 11% of total commercial real estate investment in the APAC region this year. Considering that the five-year recent average was 8%, living sector investment has increased noticeably this year. Newland said, "Co-living is one of the fastest-growing areas in the living sector," adding, "As supply expands and more properties move into the operations phase, transaction size will naturally grow further." The following is a Q&A.
— What makes co-living attractive as an investment compared with other residential assets.
"Co-living is similar to student dormitories or build-to-rent (BTR) properties, but it has a much broader tenant base. It absorbs diverse demand from not only students but also office workers, remote workers, and short-term residents, making it relatively resilient to economic cycles.
It can also flexibly set lease terms from one week to one year, accommodating both short- and mid-term tenants. This operational flexibility enables precise revenue and expense management and improves responsiveness even in an inflationary environment. Compared with traditional BTR, where lease terms are longer and adjustment speeds are slower, co-living has the advantage of faster rent adjustments according to market conditions."
— Why has interest in co-living grown among APAC investors recently.
"It is the result of strong tenant demand combined with development efficiency. In the APAC region, policies to attract international students, young professionals, and labor are active, so demand is rapidly growing for reasonable expenses, flexible contracts, and community. Existing rental housing does not fully meet this demand.
Also, co-living mostly consists of studio-based layouts, making it relatively easy to retrofit existing buildings, especially older hotels or office buildings. In high-density cities like Hong Kong and Japan, converting underutilized buildings into co-living to absorb demand from younger generations offers strong investment appeal.
In the end, co-living is a high-density rental asset that can accommodate more tenants within the same floor area, and with higher construction and operational efficiency, it has strong potential for higher rental revenue per square meter."
— What distinguishes the APAC co-living market compared with other regions.
"The co-living market in APAC is still in a growth phase, but relatively fewer regulations provide operators with high flexibility. Because there are no clear standards for co-living, not only design but also switching between short- and long-term lease models is flexible. This increases operational efficiency and is advantageous for optimizing revenue. In contrast, Europe, where co-living was introduced earlier, has much more specific rules than APAC regarding minimum lease terms, unit composition, and design standards.
In APAC, "adaptive reuse," which converts hotels or serviced apartments into co-living, is a major trend. Utilizing existing buildings allows faster supply and lower expenses. These characteristics are particularly effective for absorbing demand from office workers and students with low mobility."
— What is the growth outlook for the APAC co-living market.
"Major APAC cities such as Seoul, Hong Kong, Tokyo, and Sydney are among the regions with the highest dwellings prices relative to income worldwide. Moreover, as of last year, the number of international migrants in Asia increased by 9% compared with before the COVID-19 pandemic, but supply of suitable dwellings for them is very limited. Nationals in major APAC cities find it hard to buy homes, while foreign students and workers have high rental demand, and these two factors together create strong demand in the co-living market. They also prefer community-oriented housing, namely co-living.
Also, according to ANREV, an Asian association for non-listed real estate investors, residential assets remain among the top preferences for investors amid instability in traditional real estate markets. If interest rates fall and construction expenses stabilize, the co-living market is expected to grow further."
— What stage is Korea's co-living market in now.
"Structurally, co-living is still an early-stage asset class in Korea, but it is rapidly moving into an institutionalization phase based on a very favorable environment. In Korea, the share of jeonse is decreasing and monthly rent is becoming the mainstream form of new lease contracts, which naturally aligns with the co-living model.
Among major investable markets in APAC, Korea has the highest share of single-person households, with more than 10 million such households. About 86% of the total population lives in cities, and the price-to-income ratio for dwellings is also very high. In addition, with the 2023 amendment to the Building Act, "rental-type dormitories," including co-living houses, were included as registered rental dwellings under the Special Act on Private Rental Dwellings, and operation by private corporations is permitted, strengthening policy support.
Considering these factors, we judge that Korea's co-living market has very large growth potential."
— What is the top priority for co-living to become a stable business model in Korea.
"To vitalize the co-living market, it is necessary to ease the annual 5% rent increase cap upon renewal that applies to operators registered as private rental business operators. Although recent policy changes are positive, Korea's real estate policy is still designed around individual landlords, creating regulatory uncertainty for institutional investors. Resolving these issues would attract more capital inflows and help further grow the co-living market."