Investors told to convert existing buildings as co-living demand rises

This could ease high fit-out and construction costs.

Investors should repurpose existing assets such as small commercial buildings and shophouses into co-living spaces to meet growing demand and offset high entry barriers, analysts said.

Singapore’s co-living sector has expanded steadily, with room supply rising 17% from 2023 to 2025, according to a Jones Lang LaSalle Inc. report. Foreigners—mainly from China, Malaysia, and India—make up 70% to 90% of tenants.

However, limited land and high property prices continue to make acquisitions difficult, Emily Fell, Savills Plc senior director for living sectors in Asia-Pacific capital markets, told Singapore Business Review.

“Co-living works best in prime, central locations that demand premium land pricing,” she said in an emailed reply to questions.

High fit-out and construction costs are also weighing on developers. Investments in smart technologies, premium furniture, and sustainable construction practices have driven costs higher, said Tricia Song, CBRE Group Inc.’s head of research for Singapore and Southeast Asia.

Material prices have surged as well, with steel up 36% and cement up 6% in recent years, Fell pointed out.

To ease these pressures, investors should convert underused properties into co-living developments. “These include small commercial buildings like shophouses that don't earn much rent, as well as mixed-use buildings with empty shops or offices,” Song said in an emailed response.

She added that co-living projects are not restricted to residential zones, noting that developers could also repurpose properties zoned for serviced apartments or hotels.

Analysts said shifting financing models are making the sector more accessible. Operators are increasingly opting for management contracts over capital-intensive master leases, which allow them to operate without bearing rental liabilities.

“This asset-light model reduces the initial capital outlay required by the operator,” Fell said. 

The government has also partnered with private investors to expand rental housing options. “These partnerships are instrumental in leveraging public resources to mitigate investment risk and address critical housing shortages,” she added.