Centurion, LHN, TAP, HOMA See Rental Demand Boosting Yields in Asia’s Living Sector

Asia’s living sector is generating strong returns as growing rental demand and supply constraints boost occupancy at co-living, student housing, and worker accommodation properties, according to a panel of top executives speaking at Mingtiandi’s Singapore Forum on Tuesday. Watch the full recording>>

Young professionals in the region are showing an increasing preference for renting their homes instead of buying, with high home prices and a desire for community living boosting demand for purpose-built rental housing properties, according to Blake Olafson, founding partner of Singapore-based private equity firm Asia Capital Real Estate and co-founder of serviced apartment and co-living platform HOMA.

“The kids today who are 25, 30 years old don’t want to own,” said Olafson. “They want that flexibility…for their job or just for their own personal lifestyle. The demand that we see is that the kind of younger professional who maybe is not able to buy because of affordability or not wanting to buy, but still wants to live in a good kind of community living type of arrangement.”

Olafson joined in the panel discussion on residential investment in Asia Pacific by Ho Lip Chin, chief investment officer of Centurion Corporation; Kelvin Lim, executive chairman of LHN Limited and founder of Coliwoo; and Eugene Lim, founder and chief executive of The Assembly Place, as part of the full-day forum sponsored by Yardi.

Positive Rental Reversions

SGX-listed Centurion, which owns and operates worker accommodation in Singapore and Malaysia, is seeing near full occupancy and positive rental reversion in its facilities in the Lion City on the back of an increase in infrastructure projects. The company is also achieving tight vacancy in its student housing portfolio in Australia, the UK, and the US amidst a post-pandemic surge in student enrolments.

“In terms of investment yield, workers accommodation and student accommodation have been resilient and delivering to us very good returns over the years,” said Ho. “The living sector has attracted quite a bit of attention…because of fundamental underlying demand and supply dynamics, it will continue to do well.”

The company currently operates over 65,000 beds across its global worker and student accommodation portfolio, with the company having also recently ventured into Hong Kong and mainland China.

Coliwoo, which ranks as Singapore’s largest co-living operator with around 3,000 rooms, is seeing concerts, motor sport happenings and other attractions helping to fill its facilities.

“We are also seeing demand from events that are happening in Singapore,” said Coliwoo’s Lim. “The set-up, during the event, and also during the tear down. This is the additional demand that is being added on top of the usual long stay as well as OTA stays that we are serving at the moment.”

Cost Control is Key

Despite robust rental growth, the panelists pointed to the importance of cost efficiencies to achieving higher yields. For Singapore-based co-living operator The Assembly Place (TAP), which manages close to 2,000 rooms in 132 locations across the city, cost control is key to meeting IRR targets for its asset owners.

“Because we are not asset heavy, keeping operation costs down is very important for the business and also from the asset owner point of view,” said TAP’s Lim. “So running a low cost operation is important – equally important as running a very efficient, operational team. So with all this in place…even if revenue does not go up, as costs go up, we try our best to maintain costs at a very efficient level so that our IRR return is met.”

That view was echoed by Coliwoo’s Lim, with the facility management arm of the unit of LHN Group striving to achieve greater efficiency in maintenance, energy management and other areas of property and asset management.

HOMA, which develops, owns and operates co-living facilities in Thailand and typically targets an IRR of 15 percent to 18 percent over a timespan of five years, pointed to scale as helping the company achieve cost efficiencies across its portfolio.

“What we do is try to optimise operations, and the one advantage we have is scale,” said Olafson. “Our properties are typically 400 or 500 apartments under one roof. So we can afford to pay for a better general manager…we’re able to have more robust staffing because of the scale, which we can then share across the whole platform, across thousands of units…and as we grow, those per room costs continue to decline.”

A Panel in Pictures