Investing in coliving, a profitable business

27 May, 2024by balize

#REAL ESTATE#INVESTMENTS#TOKENIZATION

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Coliving has become an increasingly popular trend in the real estate market. The concept of communal living is not new, but coliving addresses a growing demand for shared leisure time, beyond being an economical and flexible housing solution compared to traditional renting, for example, for young professionals known as digital nomads.

Consequently, investors have followed the bullish and profitable trend of this sector, which received €121 million according to data from the third quarter of 2023 by Colliers.

In this article, we will detail what coliving is, what services it offers, and the reasons why it represents a profitable long-term investment option.

What is coliving?

Coliving is a housing model where residents share spaces, experiences, and hobbies. This type of living arrangement is 100% community-focused. Coliving spaces are perfectly designed for users to work, live, and find entertainment all in one place.

What are the components of a coliving space?

Coliving spaces are comprised of both common and private areas. Generally, the tenant has a private room with a bathroom and kitchen. The common areas include living rooms, dining rooms, and workspaces.

Additionally, many of these buildings may have shared storage areas, laundry facilities, entertainment spaces, and outdoor areas like patios and gardens. Some also offer additional services such as cleaning, shared meals, and social events.

Who typically lives in coliving spaces?

The average profile of residents in coliving spaces are individuals around 35 years old, single, living alone, and working as employees, according to 2023 data for Spain from Urbancampus. This study indicates that the average stay is 11 months and 58% of tenants are locals, although there are more than 35 nationalities represented.

Coliving spaces are particularly popular among digital nomads, individuals who work remotely without the need for a fixed location. The digital nomad lifestyle has gained popularity in recent years due to the flexibility and freedom it offers, allowing people to work from anywhere in the world, enjoy a higher quality of life, and have autonomy in managing their time.

Current trends in the Coliving market

Coliving housing is more affordable than long-term rentals; the average rental effort rate in Spain exceeds the recommended threshold by experts, which is more than 30% of income. For this reason, this housing model is thriving in major capitals. Additionally, we identify other trends:

Technology and personalization: The integration of smart technologies to manage bookings, maintenance, and communication among residents is enhancing user experience and operational efficiency.

Sustainability: Coliving properties are increasingly designed with a focus on sustainability, which not only reduces long-term costs but also attracts environmentally conscious tenants.

Benefits of investing in coliving

Predictions for the future of Coliving

Expansion to new markets: As more people seek flexibility in their work and personal lives, coliving will expand beyond major cities into secondary markets and smaller towns.

Diversification of offerings: We expect to see greater diversification in the types of communities, including options for families, seniors, and specific professional niches.

Regulation and standards: As coliving matures as a market, we anticipate an increase in regulation and the development of standards that will ensure quality and safety in these communities.

At balize we invest in Coliving

At Balize, we are committed to investing in coliving through our "balize Capital" product, focusing on long-term operations with flexible and functional residential solutions. We are currently studying several projects of this type to launch to our private investment club in the coming months. The benefits of investing in coliving that we can highlight are:

Profitability: Coliving offers higher real estate returns compared to conventional rentals. Our data shows a yield rate between 8% and 12% annually.

Low maintenance costs: economies of scale allow maintenance and service costs to be distributed among multiple tenants, reducing operational expenses and increasing profit margins for investors.

Value: it is an industry valued at over 64 billion euros.

Growth: the demand for coliving is increasing exponentially and is expected to maintain this trend in the coming years.

Secured annual income: Coliving properties have an occupancy rate of 90%, with many high-quality properties achieving 100% occupancy. Additionally, retention rates are high due to the promotion of a community feeling, reducing costs associated with tenant turnover.

Investing in Coliving through Real Estate tokenization: why is it a good option?

Real estate tokenization is an innovative way to invest in property. It allows investors to acquire tokens (a digital representation of an investment in a real estate asset) without the need to purchase the asset in the traditional manner.

Real estate tokenization presents an attractive investment opportunity for coliving. Coliving spaces have great potential for profitability due to their growing popularity and demand. This business model is projected to generate €550 billion in the next ten years in Europe, according to Cushman & Wakefield.

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