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New real estate sectors reflect changing lifestyles in Asia

Living sectors such as student housing and co-living are alternatives to traditional residential investment.

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In land-scarce Singapore, the student housing, co-living (above), senior living and multi-family sectors are still under-represented as developers typically opt for traditional residential projects. However, the aged care sector is growing rapidly, buoyed by the city-state's greying population.

BT_20181215_JLL15A_3644270.jpg
In land-scarce Singapore, the student housing, co-living, senior living (above) and multi-family sectors are still under-represented as developers typically opt for traditional residential projects. However, the aged care sector is growing rapidly, buoyed by the city-state's greying population.

MORE than half of the world's population live in the Asia-Pacific, of which a significant proportion are young people. In fact, this region is home to more than 700 million citizens aged 15 to 24.

On the flip side, we are ageing rapidly. According to figures from the UN, by 2050 there will be 1.3 billion people in the Asia-Pacific aged over 60 - which will amount to 25 per cent of the region's population.

These demographic fundamentals, along with lifestyle changes and rapid urbanisation, have led to a growing demand for real estate that reflects a variety of life stages and living arrangements.

In turn, this has spurred the emergence of a new investment sector which includes student housing, co-living, en bloc residential (multi-family), senior living and aged care. For investors, these living sectors offer higher yields than core assets such as office buildings, as well as an opportunity for portfolio diversification.

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Here in land-scarce Singapore, the student housing, senior living, co-living and multifamily sectors are still under-represented as developers typically opt for traditional residential projects. However, the aged care sector is growing rapidly, buoyed by the city-state's greying population. A quarter of Singapore's population will be 65 and over by 2030, with a third expected to need elderly care.

Aged care facilities focus on those aged over 70 who are unable to live independently. The current model is restricted mainly to nursing homes, which have wait lists of several months. Singapore's Ministry of Health aims to have 17,000 beds by 2020 to close this gap.

Shifting mindsets driving co-living sector for millennials

Meanwhile, at the other end of the age spectrum, new accommodation models have emerged in response to rising property prices. Co-living, a shared residential format with flexible leasing and community spaces, offers accommodation to cater to the needs of millennials, many of whom are delaying marriage and starting a family, or eschew the traditional home-ownership model.

Co-living buildings in Singapore and Hong Kong are currently in the investor spotlight, with Singapore-based startup Hmlet raising US$6.5 million in Series A funding led by Sequoia India. High housing costs and transient expatriate populations in these cities mean that they are emerging as hubs for co-living communities.

The co-living sector bridges a housing gap that is currently not supported by any other accommodation category - a place to stay for more than a trip, but less than a year. Hotel stays are typically a few days, while serviced apartments provide a solution for a few weeks to a few months.

Why invest in the living sectors?

The living sectors are set to outperform traditional residential investments given their efficient use of space, superior building management, and generally higher entry yields. We estimate that the aged care sector offers returns of 11-14 per cent in Tokyo, and 8-12 per cent in Singapore.

However, there remain some barriers to entry. There is a scarcity of stock for the aged care sector across the region, with those facilities requiring specific approval processes for land use compared to residential projects.

For co-living, the challenge is finding en-bloc residential (multi-family) buildings that are vacant and suitable for co-living use. Most co-living operators run an asset-light model and will need developer backing if they opt for a built-to-suit (BTS) project. It will also take time for developers to warm up to the idea of BTS co-living projects, a niche area, when compared to residential or hotel projects.

Despite the challenges, we believe the living sector will continue to evolve, supported by demographic drivers and our changing lifestyles across the region. And these changes spell opportunity for canny investors.

  • The writer is head of alternatives and chief operating officer, JLL Asia Pacific Capital Markets

READ MORE: All together now: The growing co-living scene in Singapore