Housing fix for young professionals may be a modern-day boarding house
Simonelle Mody was finally able to move from Perth to Sydney this year after dreaming since childhood of being close to the action in the bigger city. But she quickly bumped up against exorbitant rents and a lack of options in the areas where she wanted to live.
The solution for Ms Mody, 25, was an emerging type of housing called co-living accommodation that could help solve the housing shortage. The finance professional likens it to a modern-day boarding house.
Co-living typically targets working adults or young professionals who want to live in cities and are happy with smaller units and shared facilities such as laundries in exchange for lower rents.
Leases are usually for about three months, placing the type of accommodation somewhere between build-to-rent, which is for longer-term tenants, and short-term stays offered by hotels.
“I was looking for a studio and lots of normal listings didn’t make sense financially,” she tells AFR Weekend. “Then in places like Paddington, landlords are often looking at 18-months leases, which doesn’t suit someone like me where my life situation is constantly changing.
“The co-living space run by UKO I live in has been great. It has laundry, Wi-Fi and furnishings taken care of. Coming from Perth, it’s also given me a community feel that I wanted.”
That gap in the housing market is what Hotel Capital Partners, 360 Capital’s hotel platform, is looking to fill. It has acquired an art deco inner-Sydney hotel for about $31.5 million under plans to convert the building into co-living accommodation.
The hotel, which fell under the Quest brand but has been renamed Central Apartment Hotel, is in Potts Point, an enclave on the boundary of Kings Cross, on Springfield Avenue, known for having the country’s largest concentration of art deco architecture.
The decision by Hotel Capital Partners to acquire the building is to capitalise on a rising appetite for more affordable housing options such as co-living accommodation amid rental housing shortages, which have forced young people to live at home for longer.
A recent CBRE poll of more than 9000 people in the Asia-Pacific region found Gen Z accounted for almost 40 per cent of demand, and about 28 per cent of respondents seeking such spaces were living with their parents.
The reborn Central will be managed by UKO, Australia’s largest co-living operator. UKO manages more than 40 co-living and build-to-rent properties in Sydney and Melbourne, including the Paddington studio where Ms Mody lives.
The Potts Point building will operate under a typical co-living model, where its 70 hotel rooms will become units. The ground lobby and rooftop will be renovated to become communal spaces, documents for prospective investors show.
The company will focus on three-month leases for about 70 per cent of the rooms, plus business of a shorter tenure over two months, one month and a minimum of two weeks.
Hotel Capital Partners has been trying to get the building for more than two years. A deal has taken that long due to the fund manager having to convince the sellers, which comprise 73 individual strata lot owners, to a sale. The contracts are set to be exchanged ahead of Christmas.
The deal was brokered by CBRE’s Tom Gibson, Harry George and Angus Windred, with the sellers being advised by law firm Massons. Hotel Capital Partners was advised by law firm Baker McKenzie.
