Co-Living: Transcending adversity
By Joshua Li,
Hmlet and Alice Tan,
Knight Frank
/ EdgeProp Singapore |
Master bedroom at the attic of Hmlet co-living at 467 Joo Chiat Road (Credit: Hmlet)
SINGAPORE (EDGEPROP) - In its infancy, co-living was the perfect platform for expatriates to assimilate seamlessly into their new country of residence. More than just an affordable flexible housing solution that is professionally managed, co-living provides opportunities for them to meet other like-minded expatriates through community events.
From the time Hmlet began operations in 2017, 95% of our member base were expatriates. The co-living scene was thriving and bustling with activity, and Hmlet’s portfolio occupancy of above 90% was reflective of that new-found demand. Member events organised in collaboration with local F&B outlets were packed as craft beer and drinks flowed freely.
But just as the party was getting started with the co-living industry taking its seat alongside established real estate classes, the first Covid-19 case was confirmed in January 2020.
Credit: Hmlet
Pandemic uncertainty
Almost overnight, incoming demand from our core expatriate market vanished. This was amplified by the churn from existing members who ended their assignments prematurely to return to their home countries before borders closed.
The entire hospitality industry ground to a halt as cross-border travel stopped. Traditional hotels were able to find some support from mandated commercial rental concessions and government job subsidies, as well as income from Stay-Home Notice (SHN) and quarantine services. However, the situation was not as clear for the co-living industry. As most of our business is housed in residential buildings, we fell through the cracks and did not receive similar government relief packages. From a rental cost perspective, we were grateful to our landlords who extended relief to Hmlet out of their own pockets. With an entire demand audience channel shut off, co-living operators were staring into the abyss.
Hmlet’s portfolio occupancy dipped to its lowest point in 2Q2020 at 70%. This was further exacerbated by the lockdowns that did not allow for physical viewings. Even with a demand audience we knew intimately, based on our regular consumer engagement surveys, consumer preferences were rapidly shifting.
Living room of a Hmlet at 467 Joo Chiat Road (Credit: Hmlet)
Adapting to WFH
Due to restrictions on the number of unique household visitors per day and workers allowed to operate during lockdowns, we were able to deliver on some of our cleaning and maintenance services. However, that did not mean we sat on our laurels. Our member experience team remained available at all times, assisting members on their SHN and isolation needs, among others. In addition, we stepped up our cleaning efforts and ensured common areas were frequently sanitised to prevent the spread of Covid-19.
Another change was also happening during this time: our members’ perception of home location shifted dramatically. Our properties located within the CBD suffered the steepest drop in occupancies to less than 50% at the trough, as the premium for living next to the office no longer made sense in a work-from-home (WFH) environment. Conversely, our locations in the east demonstrated a lot more resilient occupancies, given the proximity to nature and amenities.
Close-up of the master bedroom at the attic of the Hmlet at 467 Joo Chiat Road (Credit: Hmlet)
The good and the ugly
Being hit by such a severe shift of fundamentals shone a light on every nook and cranny of the business model, both the good and the ugly. It forced an objective look at the state of matters, and as a start-up, we had to pivot quickly to remain relevant.
In hindsight, the fault lines were almost extremely obvious: the business model was entirely reliant on a single target market. How then could we leverage the strength of our brand to navigate this “black swan event” without a playbook?
Credit: Hmlet
Hmlet Nest
Hmlet Nest was born in June 2021, in part as a by-product of the circumstances that forced us to look inward at market demand and connect the data points gathered over time. We found that 20% of members were opting for traditional private rental listings over standard co-living offerings, because they found a partner or sought more privacy.
Hmlet Nest appealed to both local and expatriate couples alike. With the delayed construction for both private and public housing, Hmlet Nest attracted local couples in particular, who sought independence and did not want to let Covid-19 put their life plans on hold. In the same breath, it appealed to members who are working from home for the foreseeable future even as we progress towards an endemic stage for Covid-19.
We have observed a burgeoning segment of local singles, who are not necessarily rushing to jump into home ownership. Instead, they are moving into Hmlet Nest offerings — a telling shift away from traditional home ownership aspirations. The shift captures the zeitgeist of millennials and Gen-Z who feel that as their liabilities lighten, their horizons widen.
Credit: Hmlet
The road to recovery
Fast-forward to the present, 35% of our members in Singapore comprise locals and 25% of our portfolio inventory are Hmlet Nest offerings. Our portfolio occupancy for FY2021 had recovered to 85%. 2021 may have been the toughest year for the business to navigate, but in many ways, it was transformational as it forced us to adapt and leverage the strength of the brand to connect with a broader audience and change the way we do business.
We emerged from 2021 a much healthier, sustainable and stronger business as a whole. The gradual loosening of borders in 4Q2021 has benefitted Hmlet, with volume of leads up by 35% q-o-q in 4Q2021 and occupancy in 4Q2021 exceeding 90%.
This has kicked off 2022 on a positive note, with expatriates and overseas students receiving visa approvals to enter Singapore, and progressive locals who, having enjoyed independent living, continued to stay on with Hmlet, driving a broad-based demand recovery.
Credit: Hmlet
The broad-based acceptance of the Hmlet product across all demographics is an indication that the co-living industry is maturing. In a world that is seemingly migrating online in all aspects of our lives, the need for a physical community has never been more compelling.
As we reflect on the past two years, it is clear that Covid-19 was always an artificial suppressant of demand. Data shows that throughout the pandemic, our portfolio occupancy never fell below 70%, demonstrating some resilience. If anything, the need for a rental housing solution embedded in a community welcoming all demographics is an essential service that is here to stay.
Joshua Li is chief real estate officer at Hmlet (Credit: Hmlet)
Robust demand for residential rental market amid Covid-19
Singapore’s private residential rental market has been a beneficiary of the pandemic-induced work-from-home (WFH) trend. Residential leasing transaction volumes grew from 94,205 in 2020 to 99,925 in 2021, an increase of 6.1% and surpassing the pre-pandemic leasing volume in 2019 by 4.6%.
Meanwhile, the residential rental index grew 10% over five quarters, increasing from a pandemic-low of 103.8 in 3Q2020 to 114.2 in 4Q2021. For the whole of 2021, rentals of all private residential properties and non-landed properties rose by 9.9% for both markets. Consequently, the co-living market segment witnessed stronger take-up arising from a buoyant residential rental market.
Credit: URA, Knight Frank Research
Since the pandemic has upended travel and work trends, co-living dwellers are becoming more diverse, from local and foreign communities to family and older demographics. Occupants are embracing the extended benefits of co-living compared to conventional home rental or ownership. These include lower capital outlay without expenditure incurred from home purchase, greater convenience from accommodation support services, opportunities to network and participate in meaningful activities as well as a greater sense of community.
As the authorities navigate towards an endemic situation, the gradual influx of foreign workforce comprising professionals and expatriates from growth sectors — technology, biotech and healthcare — will have an effect on the residential rental market.
Credit: URA, Knight Frank Research
Coupled with construction delays exacerbated by Covid-19 and the muted pace of roll-out of completed homes, the supply of residential units available for lease could be constrained. Rental rate increases are likely to persist in 1H2022, as tenants maintain their rental accommodation amid the prevailing uncertainties of regular travel.
Knight Frank Research forecasts that rental growth of private residential property could hit around 7% y-o-y by 4Q2022.
Alice Tan is head of consultancy at Knight Frank Singapore (Credit: Knight Frank)
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