{"id":112278,"date":"2019-11-11T11:53:09","date_gmt":"2019-11-11T04:53:09","guid":{"rendered":"http:\/\/www.siamlandbank.com\/propertynews\/property-news\/short-flexible-leases-pose-big-risk-to-co-living-startups\/"},"modified":"2019-11-11T12:06:53","modified_gmt":"2019-11-11T05:06:53","slug":"short-flexible-leases-pose-big-risk-to-co-living-startups","status":"publish","type":"post","link":"https:\/\/www.siamlandbank.com\/propertynews\/property-news\/short-flexible-leases-pose-big-risk-to-co-living-startups\/","title":{"rendered":"Short flexible leases pose big risk to co-living startups"},"content":{"rendered":"


\nA majority of co-living startups rent their residential units from landlords, then later sublet the units. Analysts believe that this business model is extremely volatile.\u00a0
\nShort flexible leases could be co-living\u2019s largest risk factor in its business model, reported Business Times.
\nAnalysts said despite such leases being considered as one of co-living\u2019s main draws, co-living startups should be cautious of the volatility in its revenue streams due to a mismatch between shorter-termed rental agreements with tenants and longer-termed leases signed with landlords.
\nPaired with a highly mobile target group, such as expatriates and millennials, these models face the possibility of becoming liable for their leases without having secured tenants for the whole duration.
\nA majority of co-living startups rent their residential units from landlords, then later sublet bedrooms in these units, coupled with shared amenities and facilities such as gyms and kitchens.
\nJust like co-working, co-living aims to create a sense of community among residents via regular community events organised by operators.
\nCo-living operators, however, face risks with this setup.
\nLiu Gen Ping, fund manager at Vertex Ventures, noted that a full sublet model such as this will have fixed operating costs, making the startups \u201cmore vulnerable to a downturn\u201d.
\nCo-living companies permit tenants to lease units for short-term periods, with many of them having a staggered fee structure and featuring lower rates for longer stays.
\nThe startups often sign long term leases with landlords while earning money from low-commitment monthly rents.
\nREAD:\u00a06 Reasons Why Co-Living In Singapore WON\u2019T Be Here To Stay
\n\u201cThis model is much riskier than co-working since individuals have greater mobility compared to businesses. The risk of coming short on revenue is much higher,\u201d said a spokesman at Openspace Ventures.
\nSome co-living startups, though, can use revenue-sharing models to reduce risks. Under revenue-sharing lease agreements, the operators pay the landlords a proportion of the property\u2019s turnover.
\nThis turns the pressure over to the landlords, as the income is not predictable and makes it tougher to leverage other financing mechanisms to engineer a stable return, according to Liu.
\nBy offering a potentially volatile and uneven income stream instead of a fixed and steady one, leases like this changes the bond-like nature of property as an asset and into something more similar to an equity.
\nFor co-living startups to operate on models like this, they would need to establish its credibility and have enough scale to attract landlords. It will not help if landlords do not see the co-living concept as taking off here.
\nDespite the co-living space remaining measured since 2010 with only a few players offering limited units, demand remains high.
\nCompanies such as Hmlet, Cove and Commontown said their occupancy rates are around 90% to 95%, despite having premium rental rates.
\nThese occupancy rates \u201cseem reasonable and achievable\u201d, because the supply of co-living spaces is still limited. However, these high rates might see a decline once the supply increases.
\n\u201cThe key risk is whether they can keep this occupancy rate as high as they scale supply,\u201d Openspace Venture\u2019s spokesman said.
\n\u201cThe co-living model is sustainable only if the model can improve the efficiency in matching its space and the users, and the use of technology is one way to overcome the physical constraints in traditional rental markets,\u201d said Foo Sing Tien, Institute of Real Estate and Urban Studies (IREUS) director for NUS.
\nBy increasing value, meeting key needs of their target market and maximising cost effectiveness, co-living startups can be inside the sweet spot and generate profit.
\nLooking for a property in Singapore? Visit\u00a0PropertyGuru\u2019s\u00a0Listings,\u00a0Project Reviews\u00a0and\u00a0Guides.
\n\u00a0
\nVictor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this or other stories, email\u00a0victorkang@propertyguru.com.sg
\n
\nSource : proppertyguru.com.sg\/Property Market
\nRead more…Short flexible leases pose big risk to co-living startups<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

A majority of co-living startups rent their residential units from landlords, then later sublet the...<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"false","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"spay_email":"","footnotes":"","jetpack_publicize_message":"","jetpack_is_tweetstorm":false,"jetpack_publicize_feature_enabled":true},"categories":[1],"tags":[],"class_list":["post-112278","post","type-post","status-publish","format-standard","hentry","category-property-news"],"jetpack_featured_media_url":"","jetpack_publicize_connections":[],"jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p75ss1-tcW","jetpack-related-posts":[{"id":102748,"url":"https:\/\/www.siamlandbank.com\/propertynews\/property-news\/hong-kongs-office-landlords-are-lifting-the-bar-on-creditworthiness-as-more-commercial-tenants-walk-away-from-leases\/","url_meta":{"origin":112278,"position":0},"title":"Hong Kong\u2019s office landlords are lifting the bar on creditworthiness as more commercial tenants walk away from leases","date":"January 8, 2019","format":false,"excerpt":"\r Commercial landlords in Hong Kong, who own some of the world\u2019s most expensive offices, are doubling or tripling the money that tenants must put down as deposit, as a downturn in business sentiment and tightening liquidity in China have led to several cases of renters reneging on leases. 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