Pamfleet Launches 67-Unit Shanghai Co-Living

Hong Kong-based real estate investment firm Pamfleet is launching a pioneering co-living project in Shanghai, the company revealed to Mingtiandi, as the communal living model that has proven popular with young professionals in Europe and the US makes its first inroads into China.

Cohost West Bund, the co-living facility in the southern part of Xuhui district, is now accepting tenant applications ahead of its scheduled completion this summer. The project is located at 218 Baise Lu, adjacent to the Shanghai Botanical Gardens and less than five kilometres southwest of the business and innovation hub of Caohejing Hi-Tech Park.

Cohost West Bund features 67 apartments including studio, one- and two-bedroom units, a full gym with a pool and tennis courts, and over 1,000 square metres of boutique street-front shops.

From Hotel to Shared Living Space

Cohost West Bund Shanghai

Rendering of a room in the upcoming Cohost West Bund co-living project

Pamfleet partnered with Hong Kong-listed Deson Development International in October 2016 to acquire the residential project through its inaugural mainland investment vehicle. A subsidiary of Pamfleet paid RMB 57.4 million for a 70 percent stake in the joint venture, while Deson held the other 30 percent.

Under the deal, Deson is also assisting Pamfleet in managing the asset. While Pamfleet is known for carrying out its own asset management in Hong Kong, for its first mainland foray the value-add investment specialist opted to work with an established partner that already has a team on the ground.

The duo is working with Build, a boutique property development and management firm that specialises in the refurbishment of old Shanghai buildings, to redevelop the former Starway Parkview South Station Hotel into a communal living facility. After focussing on designing the project and getting the relevant approvals and permits to start construction, the partners have recently broken ground on the site.

“According to the latest construction schedule, we should have the product ready summertime this year,” said Kelvin Wong, a managing director at Pamfleet in an exclusive interview with Mingtiandi.

Pamfleet Works with Build to Launch Co-Living Brand

Patrick Kelly Build

Patrick Kelly, MD of Build Special Projects, wants to redesign the living experience

Build and Pamfleet worked together to create the Cohost co-living brand, and the partners brought Shanghai-based AIM Architecture on board to craft a design that fills a niche between low-end student and youth apartments and high-end serviced residences.

Todd Gill, who co-founded Build with Brent Beisher in 2008, spent over a year canvassing co-living offerings around the world to prepare the inaugural project in Shanghai, according to Patrick Kelly, Build Special Projects Managing Director.

“Our focus is on creating tenant communities to enhance the performance of our buildings,” Kelly commented to Mingtiandi. “Build caters to design-driven clients who are looking for modern spaces with a design aesthetic in a more personalized, unique environment than other, mass-produced, commodity real estate.”

“We set out to redesign living,” he added.

Xuhui District Project Targets Teachers

The property targets residents from the ages of around 25 to 35, who are looking to upgrade their accommodations and share a roof with other young professionals. “Our designer rental accommodations connect active people with long-term shared apartments,” Kelley said, adding that Cohost’s goal is for communities to embrace “connection and sociability, good design and a healthy lifestyle.”

Pamfleet is confident that the project will benefit from its wide catchment area and proximity to commercial hubs in Shanghai. Wong told Mingtiandi that 81 schools lie within a one-kilometre radius of Cohost West Bund, which will target staff and teachers from those institutions.

Aside from the Caohejing business park, the project is three kilometres west of the Shanghai West Bund urban regeneration project along the Huangpu River, which the district government aims to develop into a major commercial zone with museums, theatres, and corporate headquarters.

Investors Check into Chinese Shared Living

Pamfleet is also moving ahead with a co-living project closer to home. In early 2017 the company purchased an 11-storey building in Hong Kong’s Tsim Sha Tsui area on behalf of its Pamfleet Fund II, for a price reported to approach HK$600 million. The upper seven stories of the building at 176 Nathan Road are dedicated to residential space, which Pamfleet plans to convert into co-living units.

Pamfleet is among a growing array of investors that are betting on China’s nascent co-living market. Last September, a fund managed by Hong Kong’s Gaw Capital Partners invested in Harbour Apartments, a Shanghai-based firm that operates co-living spaces aimed at young tenants in seven major Chinese cities.

Although the terms of the deal were not disclosed, local media reported that the investment by the private equity shop formed part of a Series A round of financing that brought Harbour Apartments a total of RMB 400 million ($60.9 million).

US private equity giant Warburg Pincus is also betting on the shared economy real estate sector, co-founding rental residence platform Nova Property Investment with Chinese entrepreneur Qian Wang in early 2015. Last September, a Warburg Pincus affiliate committed $183 million to the mainland firm with dozens of projects in operation or under development in Shanghai.

Nova, which merged with Shanghai-based Yicheng Property Investment in 2016, operates and develops co-living facilities through its BaseLIVING brand.

Hotels in Hong Kong convert to co-living

An increasing number of hotels in Hong Kong’s non-core tourist areas are toying with the idea of converting their properties to co-living spaces as they face challenges from the changing travel pattern of young professionals and a drop in mainland tourists, say industry experts.

“Hotels converting to co-living use can become a trend,” said Alvin Leung, associate director of valuation advisory services at JLL.

Mojo Nomad Aberdeen Harbour in Wong Chuk Hang is one such hotel to have converted to co-living in December, which now consists of 65 rooms and 250 beds.

Brushing aside the suggestion that some hotels were converting their properties because of a decline in mainland group tours, Girish Jhunjhnuwala, founder and CEO of Mojo Nomad and Ovolo Hotels Group, said the move was purely to tap the rising demand of “the new generation of travellers who live and work in different places”.

 “We’re converting a second hotel in Central to co-living use, which will launch later this year,” he said. “The conversion has nothing to do with the locations of the hotels.”

The advantage of Mojo Nomad, the co-living sister of Ovolo Hotels, is its hotel licence, which enables short-term stays and more flexibility than other co-living operators in the city that had converted from residential buildings, said Jhunjhnuwala.

“When you have a hotel licence, people can just come here to stay for only a few days. But tenants at other co-living spaces with bed space flat licence need to stay for a minimum of one month,” he said.

Rates range from HK$250 (US$32) a night for a room shared by eight people to HK$3,500 a night for a premium private room that can accommodate a group of 14.

According to JLL, hotel owners and investors can improve rental yields by up to 12.1 per cent if they convert an existing property into a co-living scheme

Excluding discounts for extended stay, the starting rate is about half the HK$555 a night at the nearby four-star L’hotel Island South, according to Hotels.com as of Monday.

The conversion of the 26,000 square foot property, which sits on a site that is worth HK$400 million, cost HK$60 million. And Jhunjhnuwala was confident of breaking even in one year.

“Occupancy improved to 70 per cent even though the number of beds increased,” he said.

The occupancy rate is on par with the industry average.

Eton Properties’ Mini Ocean Park Station in Shouson Hill Road, has an occupancy rate of 70 per cent, while that of Synergy’s Bibliotheque in Yau Ma Tei in Kowloon stands at 60 per cent.

Jhunjhnuwala said he was also going to open a co-living space in Melbourne, while others in Sydney, Shanghai and Singapore were also being planned.

Excluding Mojo Nomad, there are currently five hotel operators offering co-living services in Hong Kong, with three more set to open in the coming two years.

According to JLL, hotel owners and investors can improve rental yields by up to 12.1 per cent if they convert an existing property into a co-living scheme.

Other examples of hotels that are being converted to co-living use include Hotel 36 in Prince Edward. C2 Hotel in Sham Shui Po was converted to M3 International Youth Apartment in 2016.

Another reason for the conversion has been a sharp decline in mainland group tours after shopping tours were banned in 2015.

William Cheng Kai-man, chairman and CEO of Magnificent Hotel Investments, which manages nine hotels, including Best Western in Hong Kong, said hotels in non-core areas were 70 per cent dependent on mainland group tours.

“Our hotels in Tsim Sha Tsui, the Western districts, Causeway Bay and North Point have achieved revenue growth of 35 per cent in February because of the Lunar New Year holiday, with most guests being individual travellers from the mainland,” Cheng said.

“In contrast, hotels in non-core areas, which rely heavily on group tours, experienced last minute cancellations,” he said. “Price competition in these areas is unhealthy.”

Despite the recovery in tourist arrivals, the number of tourists visiting Hong Kong last year was still 3.9 per cent below 2014’s 60.84 million, according to Hong Kong Tourism Board.

Hardest hit have been hotels that are not in tourist districts such as Tsing Yi.

Cutthroat competition has led to room rates of hotels in Tsing Yi, such as three-star 800-room Winland 800 Hotel, formerly Mexan Harbour Hotel, being slashed to as low as HK$207 per night on Tuesday, according to Trip.com, while the 882-room Rambler Oasis Hotel owned by Li Ka-shing’s CK Assets, located near Winland 800, was charging HK$309 per night.

Asia’s Millennials open up co-living market

The Millennial move towards communal living is opening up opportunities for real estate developers and investors in Asia’s busiest cities.

Co-living, a term used to describe a living arrangement that is something more than shared space, in growing in Asia, especially in China and Hong Kong. Typically, a co-living facility will offer tenants small rooms but also shared facilities such as a TV room or a gym. There is also a social aspect; some facilities have a manager who will organise events. As well as convenience and community, co-living facilities also claim to offer cheaper rent than an individual apartment.

Hong Kong is seeing a growing number of co-living developments – unsurprisingly given its status as the world’s most expensive housing market. Young workers face the prospect of living with their family until they can afford to buy a small flat; ‘small’ often means less than 200 square feet.

At present, some developments described as co-living are no more than upmarket dormitories for budget-conscious students, while others are just shared apartments with different branding.

However, Denis Ma, Head of Research at JLL Hong Kong, says: “Though current schemes in Hong Kong are built around affordable housing, there are some really interesting projects that will be opening soon where the communal space is quite significant and the operator has hired an activities officer to bring residents closer together.”

Recent co-living developments include Gaw Capital’s Campus Hong Kong in Tsuen Wan, which offers a gym and pool as well as common areas in a 12 storey building and SynBOX in Hung, M-Living in Wong Chuk Hang, which offers tiny (80-100 square foot rooms) with shared common areas, inclusive bills and cleaning facilities. Campus Hong Kong’s extra facilities do not come cheaply: a private room costs HK$20,000 per month.

From the property investor’s point of view, co-living offers an attractive opportunity to gain extra revenue from services and to be able to fit a larger number of rooms in a single building. Hotel owners have also been converting underperforming hotels to co-living facilities.

Ma calculates that an owner of residential building could boost net operating income yield by 400 basis points if it was converted to a co-living facility, while a hotel’s conversion could boost the NOI yield by 300 basis points. Thus conversion to co-living could add substantially to a building’s value.

In China, the co-living trend fits with Beijing’s desire to build a residential rental market, which will boost labour mobility by allowing graduate workers to live in first tier cities such as Shanghai, where property costs have soared. Operators such as You+, 5Lmeet and Mofang Gongyu – which has received funding from Warburg Pincus – house thousands of tenants in hundreds of buildings.

Their business model is underpinned by two factors: firstly support from the Chinese government and secondly the opportunity to reposition older or underused buildings.

In Singapore, affordable public housing is available to a large portion of the population and perhaps due to this, there is only a small portion of rental housing or co-living establishments, says Regina Lim, Head of Capital Markets Research – Singapore at JLL. “One could argue the Singapore case study implies that co-living is born only in cities where housing is unaffordable.”

Some Singaporean companies are testing the water: CapitaLand’s serviced residence unit, The Ascott Limited, has created a new coliving brand ‘lyf’, which claims to be “designed and managed by millennials, for millennials.” Five properties across China, Singapore and the Philippines are slated for opening from this year to 2021. lyf Funan Singapore will be part of CapitaLand’s integrated development Funan, which also includes retail, office and coworking spaces

Apartment space is not cheap in Tokyo, but years of deflation have been good for renters and so far the city has seen the development of only a few co-living spaces. Roam, in Akasaka, offers tenants a 340 square foot room with a balcony. Shared spaces include a co-working space, multiple meeting rooms, a circus themed workout and Yoga room, and a shared commercial kitchen. Rooms can be leased for as little as a day and with a monthly cost of around US$3,000, Roam – which also has facilities in Miami, London and Bali – is closer to a serviced apartment than a space for long-term living.