PROFILE: Coliving operator Hmlet only set up shop in Sydney early this year but its portfolio has grown quickly to more than 200 rooms across Paddington, Newtown, Marrickville, Alexandria, and most recently the Western Sydney suburb of Parramatta.
This fast-paced growth is largely because unlike other coliving operators, which are usually developers, the Singaporean-based company actively chooses not to own any real estate.
“Real estate development is really capital intensive,” Hmlet Australia managing director Chrystan Paul told The Fifth Estate.
Instead the company wants to focus on acquiring and operating assets.
“We want to make sure the capital goes to our members, and allows us to scale.”
The company is currently operating three different types of real estate.
The first is purpose-built coliving communities, which are essentially upscale boarding houses. The company has recently partnered with Revelop, a Sydney-based developer that works across residential, commercial and retail sectors, to build such a facility in Harris Park in the Western Suburbs. To be completed in 2020, the project will have 41 ensuite studios, a communal kitchen and rooftop terrace, as well as places to eat and drink on the bottom floor.
Paul says the plan is to operate more of these in future by partnering with developers and investors.
The company is also rejigging existing residential assets for coliving. Along with the Harris Park development, the Revelop deal involves repositioning three existing residential assets in Mays Hill in Sydney’s west, Petersham in Sydney’s inner west and Balgowlah in the northern beaches for the coliving model.
The company is already offering this type of housing in its Marrickville site, which involves adapting two and three bedroom apartments for coliving.
The third type of real estate it’s offering is terrace housing. It furnishes terrace hosues and offers them for sublease with cleaning, bills and other problems “taken away” and replaced with an all-inclusive membership fee.
Hmlet acquired the start-up cofounded by Chrystan Paul, Caper Co-Living, when it entered the Australian market earlier this year. The company, which started in Singapore, now has an Australian team of 15.
Moving into the western suburbs
Paul says the choice to move to the western suburbs – one of the fastest growing commercial hubs in Australia – was a strategic one that proves that coliving doesn’t need to be close to the city to work.
The coliving space in Mays Hill near Parramatta city, which opened in August, has seen the fastest rate of pre-sale memberships of any of the coliving spaces.
It’s not 100 per cent clear why but Paul suggests that the Millennial target market is more “location agnostic” than expected, and keen to pay 20 per cent less rent than a comparable space in the inner city while still experiencing the community vibes of coliving.
“When plotting Hmlet’s future growth in Australia, we recognised the strategic importance of establishing a presence in Parramatta to cater to a swelling urban population, which in turn is feeding the need for community-oriented living,” Paul says.
“With a quarter of a million people expected to move into area by 2041, at a population growth of 107 per cent, this new way of living isn’t just preferable, it is necessary.”
Investors are on board
The partnership with Revelop follows the close of Hmlet’s Series B investment round of $55 million, with participation from Burda Principal Investments, Sequoia India, Mitsubishi Estate Co and Westpac-backed venture capital firm Reinventure Group.
The new capital will help strengthen the company’s presence in Singapore, Hong Kong and Sydney, as well as expand into new markets including Tokyo, Melbourne and Brisbane.
The company has grown wildly since it was founded by Yoan Kamalski and Zenos Schmickrath, who came up with the idea after renting out rooms of their semi- detached home in Singapore. There are more than 2400 beds in the pipeline expected by the end of 2019.
Demand for these spaces is strong
It helps that spots in the company’s housing arrangements are filling fast, according to Paul. He describes the lack of vacancy as “a nice problem to have”.
Coliving is a sub-market of the build-to-rent sector where people can secure flexible and long term rentals through a landlord, but there’s a stronger focus on building community through shared amenities and social events.
Paul says coliving is taking off in places such as Australia where transient Millennials typically “haven’t been given much love” when it comes to housing options.
Largely priced out of home ownership, young people in Australia are left with no choice but to rent.
But this comes with extensive administrative effort to sign leases, pay bonds and purchase furniture – all of which is less-than-appealing for young professionals who might finish up in a job and move to another city before the lease is up.
Coliving factors these administrative hassles and other services such as cleaning into the membership fees. Paul says once you consider the cost of furnishings and various shared amenities, the pricing is either comparable to a regular sharehouse or maybe a little cheaper.
Rents vary strongly and so do lease terms
Hmlet rooms start at $325 a week for a “pocket room” spot in Marrickville, one of the more diverse coliving spaces. A room in a four bedroom terrace in Paddington will set you back $425-450 depending on the size of the room (sharing a bathroom with one other person).
At the more premium end, there’s studios in the Marrickville space for around $550 and one bedroom apartments for $700-750. The membership fees are all inclusive.
Leases are flexible. They start at three months and after that are renewed month to month. Members can then stay on as long as they want, but need to provide a months notice before they depart.
Curating the community
Some work goes into curating these communities. Although Paul says the company is not exclusive, it does check that prospective members will be a good fit in that coliving space. He says this help avoids conflict and issues down the line.
There’s an onsite manager for the bigger sites, and for the smaller sites there’s someone offsite who is on call for operational matters and emergencies at all times.
Community is key
He says this model isn’t for everyone but attracts a certain person who is interested in flexible leases, serviced rooms and shared amenities such as rooftop terraces and cafes on the ground floor, as well as other perks such as monthly social events.
Coliving is a way of offering people an instant community and combating some of the loneliness and isolation people are experiencing in big cities, Pauls says, especially when they only plan on a short stay.
Although the model originated from the student housing model it’s catering to an older crowd, with 25-35 year old working professionals the target demographic.
Members are not people straight out of school, he says, but young professionals focused on their careers but keen for a “drink on the rooftop on a Friday night”.
“From the point of view of design, we’re offering higher density living in urban environments, and in exchange for you compromising on some private space, we’re offering higher levels of amenities, highly designed kitchens, and well furnished apartments.”
He says it’s a model that’s born out of rapidly urbanising cities and a lack of housing affordability. He says Millennials are less inclined to pursue property ownership due to housing prices but still have high disposable incomes and are attracted to the notion of a good living experience.
Although other demographics are in the company’s sights long term, it’s first pitching towards the “asset light” crowd – such as those happy to forgo car ownership in favour of using ride sharing services – in the hopes of refining the model before rolling out to other demographic groups in the future.
Coliving can be a low footprint way to live
A well-managed coliving arrangement can also lead to a smaller environmental footprint for each person as facilities such as laundries and kitchens are shared.
The fast growing business is currently driving recycling in its properties and installing solar panels in some of its locations. Pauls says sustainability will only become a stronger focus going forward to align with the values of its core customer base.