Why coliving and coworking are attractive investments
Coliving and coworking are a very attractive investment opportunity as they are flexible real estate solutions that offer higher returns than traditional residential and office rentals. The rate of return for both is between 7% and 11%. For this reason, real estate companies, investment funds, traditional developers, asset owners and managers of residential and office properties are betting on these two formulas.
At HWL we help owners with real estate assets to exploit them as coworking, coliving or hybrid business. Before making any investment it is essential to first confirm that the asset is valid for this type of business through a local market analysis and develop a feasibility study to determine the business potential. Once we know the profitability and financial projection of the project, we will initiate a bidding process to hire the operator that will exploit the asset, in case we want to outsource the management. This entire process will be carried out in four phases.
First phase: feasibility study
This phase involves conducting a local market study and a financial feasibility study.
The market study has to consider the location’s environment, the nearby competition and the type of existing demand. The objective is to detect an opportunity for the coliving or coworking business and to know the needs of the demand we are going to address in order to design the services we will offer and the business model.
As for the feasibility study, it will be based on the unique offer of the building, that is, it will support the acquisition and selection of the operator through the standardization of a commercial proposal format. We will develop a 10-year financial study based on local market research and our experience in the industry, we will pay special attention to different management models. The financial study includes:
- Detailed revenue assumptions.
- Detailed OPEX assumptions.
- CAPEX estimation.
- Profit and Loss Statement.
- Treasury.
- Sensitivities – Focusing on the different management models.
Second phase: Operator selection
In this phase we make a broad selection of potential operators. Through an evaluation process we narrow it down to a shorter list of operators that we believe to be the most suitable for the project:
- Benchmarking of international and/or local operators qualified by suitability.
- Pre-qualification of long list with interviews.
- Expression of interest.
- Operators final selection.
Third phase: Request for proposal (RFP)
We already have the final selection of qualified operators. The next step is to define the proposal we are going to offer to the finalists, detailing the obligations and responsibilities of the two parties that will form the basis of the agreement.
- Preparation of the RFP document.
- Development of a detailed scope of work.
- Preparation of the technical and commercial evaluation matrix for the selection of the final candidate.
Fourth phase: Tender support, evaluation and negotiation
In this last phase, we assist in the preparation of the bid and during the entire bidding period, i.e. from the issuance to the negotiation and award of the contract.
Mainly, the tasks we perform are:
- Management of tender enquiries/requests for information (RFI – Request For Information) – from the operator during the bidding process.
- Evaluation of the technical proposals received, culminating in a score based on the Evaluation Matrix.
- Evaluation of the commercial proposals received, culminating in a score based on the Evaluation Matrix Matrix.
- Support in contract negotiations, based on HWL’s experience and industry-standard terms and conditions.
If you have a property, you are considering operating it as coworking or coliving through an experienced operator; we can help you find the most suitable operator through this bidding process. Contact us.
Featured image: Mindspace Warsaw.
