Where hospitality meets housing: The rise of the hybrid investment

Is it a build-to-rent studio? Is it a serviced apartment? Is it a hotel room?

No, it’s actually a super-blend of all three.

At a time when flexibility has emerged as a key concept in both the residential and commercial sectors, an innovative hybrid residential-cum-hospitality asset is attracting huge attention from investors.

It’s a building currently under construction in Adelaide that merges three verticals – Veriu Hotels & Suites, Punthill Apartment Hotels and the co-living and build-to-rent operator UKO – into a single unified brand, LiveStay. It’s a project likely to be the first of many throughout Australia.

“We’re providing a hybrid operating model that gives the owners and investors exposure to everything under the umbrella of short-, medium- and long-term-living in the one asset,” says LiveStay co-founder Rhys Williams. “This is the first tower that integrates the different sectors, where people can stay one night or 12 months.

“It’s a unique way of running one building which will be very attractive to investors and developers because it offers a diversity of income streams and exposure to different markets which significantly de-risks any investment. I think it’ll be very appealing. It’s already happening overseas and I think it will take off here very quickly.”

The tower, with 240 studio apartments, will operate half as an apartment hotel and half as a co-living space, with a variety of communal facilities for users. While this project has a single owner and a building manager, it’s now being courted by institutional investors and high-net-worth individuals looking to diversify their investment risk.

With both travel and living styles evolving globally, it was inevitable that capital would shift to accommodate them, says Diana Sarcasmo, managing director of Colliers Residential.

“We’re now having new options that weren’t here five or six years ago,” she says. “It’s interesting in encompassing the full spectrum of co-living, student accommodation, build-to-rent and hotels. It shows how there’s now a lot of choice, and it might not be all about owning your own home.

“It says more about affordability, a curated lifestyle and having flexibility. This is probably the fastest emerging sector at the moment on the living model and allows operational efficiency across the different segments. I can see the attraction for investors.”

Financial advisor Ben Nash, the founder of Pivot Wealth, understands how assets like these could be extremely useful in an investment portfolio.

“Diversification is one of the main principles of risk management when it comes to investment,” he says. “So, the idea of spreading risk across different income streams has proven to be very effective in the past.

“This does change your profile as an investor, though, as it might be a residential, or a commercial, asset. But the main thing is to protect yourself in a downturn and you always want to make sure you understand the nature of an investment and that it fits with your overall strategy, although innovation is always great to see.”

Williams agrees. “We’re so used to deciding between investing in the residential sector or in retail, industrial or office,” he says. “But this is another avenue for the investor, and I think there are a lot of investors, both domestically and globally, who are keen to get exposure to the living sector in Australia.”