As the living sector continues to expand, it is evolving into more targeted micro-segments designed to diversify income streams. “Flex living” is one such emerging model gaining traction in Asia.
A flex building caters to both long- and-short stay guests. For the operator—and ultimately the investor—this hybrid model helps smooth earnings, with long-stay tenants providing a stable occupancy base load during quieter trading periods.
A key proponent of the concept is the lodging arm of the Singapore-based CapitaLand which says the line between serviced apartments and hotels is increasingly blurred. Operators are also blending purposed-built student accommodation (PBSA), permanent rentals and co-living to create “flex buildings”.
The “flex-hybrid” model combines long-stay to provide income stability with short-stay to capture the upside and optimise revenue, according to Kevin Loh chief executive of CapitaLand Investment (CLI) Lodging when speaking to the group’s latest investment in Japan.
In June, CLI has secured a prime mixed-use asset in Tokyo at more than JPY30bn (€182m) with its co-investors in its second value-add private lodging fund, CapitaLand Ascott Residence Asia Fund II (CLARA II).
Invesco and its Korean partner, SK D&D, is undertaking due diligence to buy a residential asset which currently caters to both longer and short term stays for around US$100m (€85m) in Seoul.
Sydney-based Pro-Invest Group, a hospitality operator/investor, has made a strategic move into flex-living sector.
According to Ronald Barrott, founder and chair of Pro-invest Group, said: “Our flex-living model will offer a variety of accommodation options, while fostering a sense of community through shared spaces and personalised services. The fundamentals of low vacancy, low supply, and changing lifestyle preferences are supporting a positive outlook, and we are perfectly poised to capitalise on this.”
Most recently, Pro-invest formed a joint venture with Japan’s Kajima to develop build-to-rent assets, starting with an initial investment of A$500m (€279m).
Flex-living is a by-product of COVID-19 lock-downs, forcing operators of hotels and PBSA buildings to look for alternative ways to fill their vacant rooms.
CapitaLand found that while hotels were closed, services apartments achieved occupancy of 60%-70%, even during the height of the pandemic because they operate like a hotel and pivot to function like a longer-stay multifamily apartment with shared amenities when required.
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