Valuation of coliving promotions
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The valuation of coliving developments consists of determining the real economic value of projects and assets designed for the co-living model, a format that combines characteristics of both residential and commercial. This service is essential in a context of strong growth in the main cities of Spain, where the demand for flexible spaces by young professionals, digital nomads and students has turned coliving into an asset class of great interest for developers, investment funds, operators and financial institutions.
Given its operational nature and the complexity involved in managing both private spaces and common areas and additional services, its valuation requires a specialized technical approach that goes beyond the usual methods of valuation of single-family housing or multi-family building.
What is a coliving promotion and why value it professionally?
A coliving development is defined as a real estate development in which private units coexist with a series of fully equipped common spaces – coworking rooms, leisure areas, gyms and laundry areas. This operating model bases its value on the integrated offer of housing and services, and is based on contracts that combine traditional rental with the provision of services included in a fee.
The professional valuation of this type of development is essential because, firstly, conventional housing valuation methods – focused on the comparison of prices per square meter and the state of conservation of the property – are insufficient. Secondly, the revenue streams generated by each room must be analyzed in detail, as well as the operating costs associated with the maintenance of common areas, cleaning, staffing and energy consumption.
Only a valuation firm with experience in operating assets can integrate all these variables in a technical-financial report.
Difference versus traditional residential assets
The main difference between a coliving development and a traditional residential asset is that coliving is not valued solely as a property, but as a going concern. In the case of a conventional rental apartment, the analysis is based on a single long-term contract and market price comparison.
In coliving, on the other hand, each room functions as an independent business unit that generates periodic cash flows, usually monthly, and is affected by the variation in occupancy and user turnover.
In addition, the value of the common areas and services included – ranging from high-speed fiber optics to the organization of community events –must be quantified and added to the overall value of the asset.
Patrimonial vs. exploitative approach
The asset valuation of a coliving development focuses on the value of the land, structure, finishes and furnishings, using land comparison and replacement cost methods. This approach is particularly useful in the early stages of the project or when the asset is not yet in operation.
The operator approach considers the coliving as a going concern, applying profitability analysis techniques by discounting cash flows or by applying a capitalization ratio to annual net income.
This second method is essential for valuing developments already in operation or with closed management contracts, as it incorporates the projection of future income and the operating expenses necessary to maintain the activity.
Factors influencing the valuation of a coliving
Determining the economic value of a coliving development requires taking into account a diverse range of variables that, as a whole, make up the viability and profitability of the project. The analysis must delve into the physical characteristics of the property as well as its environment and management conditions.
Location and urban connectivity
The proximity to major activity centers such as technology parks, university campuses and financial districts increases the attractiveness of the development and allows higher rates to be applied. In addition, having direct access to several subway, commuter train and city bus lines significantly reduces travel barriers for tenants, which translates into a value premium over peripheral locations. Finally, the presence of proximity services such as supermarkets, health centers, leisure areas and cultural offerings reinforces the perception of quality of life and contributes to stabilizing the occupancy rate throughout the year.
Occupancy and turnover
The historical or expected occupancy rate is a key determinant in projecting future coliving revenues. An asset with an average occupancy above ninety percent tends to have a higher revenue consistency and, therefore, a higher operating value. On the other hand, user turnover, which varies by tenant profile, e.g., students with nine-month stays versus professionals with six-month stays requires including a vacancy factor in the analysis, i.e., the periods between contracts during which the room remains unoccupied. The longer the apartments remain vacant without being rented, the more the value generated by the building decreases each year.
Type of units and services included
The real estate configuration directly affects the level of revenue. The square meters dedicated to coworking or study areas can justify higher rates, as they add a differentiating value compared to the coliving offer without these facilities. The degree of technological equipment, such as home automation systems, efficient air conditioning and high-speed fiber optics, as well as the incorporation of comfort elements, should be assessed separately, as they contribute to raising the average monthly rate.
Operator and management model
Having an operator with experience in the management of alternative residential assets adds extra security to the project. Management contracts that combine a fixed fee with a variable percentage of income allow the interests of the owner and the manager to be aligned.
Duration and type of leases
Individualized room contracts offer great flexibility to the user, allowing stays from one month to two years. This versatility is attractive to both digital nomads with short-term housing needs and students and young professionals looking for one- or two-year academic contracts.
At what stage can a coliving promotion be assessed?
The stage of development of the project conditions the choice of the valuation method and the degree of precision of the results. Each phase of the promotion life cycle requires adjusting assumptions and uncertainty margins:
Project in initial or planning phase
When the project only exists in the planning process, the valuation is mainly based on the value of the land and the estimation of the development potential. For this purpose, economic feasibility studies are carried out, including simulations of construction costs and potential revenues.
Development under construction or renovation
Once construction has started, the cost method is appropriate. Pending execution costs are projected, deviation coefficients for possible cost overruns are applied and checked against the first reserve figures.
Asset in operation or fully operated
When the coliving is already in operation or has a signed management contract, the profitability approach takes center stage. Alternatively, a capitalization coefficient is applied to the stabilized annual net income.
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Frequently asked questions about coliving
What is the difference between valuing a coliving and a rental apartment?
The valuation of a coliving considers that it is an operating asset that generates recurring income from rooms and associated services, so the analysis focuses on the profitability of the business and not only on the value of the property.
Can a coliving development be valued before it is built?
Yes, through feasibility studies and the application of cost and revenue projection methods, it is possible to estimate the value of the project at the planning stage.
What documentation do I need to evaluate a coliving promotion?
It is essential to have the technical project, the market study, the business plan, the contracts with the operator (if any), historical or estimated occupancy data and the planned tariffs.
How long does a coliving appraisal take?
The deadline varies depending on the degree of development of the project, the availability of information and the scope of the report requested.
