Co-living and student accommodation groups expected to circle Balmain Backpackers in Sydney's inner west

The 424-square-metre site could yield an estimated 45 studios, given the approved gross floor area of 818 square metres and the typical room size of 18 square metres, subject to council approvals – what Mr Cowan called “a relatively smaller scale co-living (project)”.

There are 85 beds across 21 rooms in the hostel. Photo: Supplied

“For co-living to work, the floor-to-space ratio can’t be too high because if it was too high, the better use would be residential development,” he said.

“This falls in a 1:1 floor-to-space ratio, which means that high-density residential developers won’t be interested, and therefore the co-living guys can come in and get an appropriate price.”

The property has 85 beds across 21 rooms, and has an estimated turnover of about $650,000 a year.

It has been running as Balmain Backpackers for about 20 years, and is owned and operated by Andrew Urbanski through his company Karmel & Co Pty Ltd, which bought it in 1994. He is selling the asset as he believes it is “the time to capture the strength of the market”, according to the agent.

The building is also approved for alterations and additions to the existing backpacker hostel, as well as eight residential units on the ground-floor car parking area.

The property is on a 424-square-metre site and can be further developed. Photo: Supplied

“The existing approval will obviously be a major drawcard for buyers, however, the development approval for eight additional apartments and potential alternative uses, such as student accommodation, co-living and boarding houses, is expected to draw the majority of interest,” Mr Cowan said.

Mr Cowan said non-developers have the option of retaining the business as a backpacker hostel, which are “rare” in the inner west, and refurbishing the property to maximise room rates.

“There’s only one backpacker hostel accommodation in Rozelle, in the inner west; there’s nothing in Balmain, Rozelle or Drummoyne. The closest you’ll find something similar is in Ashfield,” he said, adding that it was difficult to obtain development approval for backpacker hostels.

The hottest co-living spot

UKO in Sydney’s Stanmore is Australia’s first co-living building to begin operating. Image: ATWD Studio

Mr Cowan said he has spoken to co-living operators and student accommodation developers, who are on the hunt for sites with dual street access close to education precincts.

“King Street, Newtown, is probably one of the most sought-after areas just because it’s so close to a variety of different universities in the city and it’s very, very well-accessed by trains and buses, so it’s probably the hottest market,” he said.

The agent noted that some of these developers have faced problems with new government legislation on car parking in NSW, which has imposed a higher quota of parking spaces for boarding house-type developments.

“They’re having trouble with the car parking (requirements) because previously, they used to only need to have one car space per five (rooms). Now it’s one to two, so that’s certainly made some constraints.”

Hotel group Veriu co-founders Alex Thorpe and Rhys Williams opened the country’s first co-living property UKO, comprising 33 studios, in the inner west’s Stanmore in September.

And Caper Co-living is preparing to open two properties, made up of a combined 56 rooms, in Newtown and Petersham in early 2019. The building in Newtown is on King Street.