Queuing Out the Door: Co-Living Comes of Age

“We bought it for less than half of what a good apartment in that suburb is selling for.” It was a good buy for Carpe Diem, but it was also the birth of a new living sector play for the five-year-old property investment firm. Carpe Diem founding partner Simon Wheatley and his team acquired a six-level building with 42 self-contained rooms and shared facilities at 39a Elizabeth Bay Road, Elizabeth Bay for $7.98 million in June 2025. It was their first city residential acquisition and the seed asset for their Prime Living Fund. Carpe Diem has primarily focused on regional motels, office and service stations to date. The Elizabeth Bay acquisition marked its expansion into other living sectors. Wheatley says institutional investors still see co-living as more of a “piecemeal, emerging sector”. “We’ve focused quite a lot on the living sector. We’ve got a mix of assets, but we’ve stepped into regional accommodation fairly hard. We’re probably one of the biggest investors in that sector in Australia,” Wheatley says. “We’ve got in the order of 10 properties regionally, as well as the Elizabeth Bay property, which is our first city asset and our first co-living strategy.” Wheatley says he felt relatively comfortable with pursuing co-living in the current market. He says he researched it heavily about seven years ago, but it is starting to gain traction in today’s market. First move into co-living Carpe Diem has partnered with Alt Living as the management team for the co-living asset, which is at 100 per cent occupancy and has a waiting list. Wheatley says the value proposition is strong for the character property, Montpelier House, and that they plan to refurbish the building’s public areas to make it “more homely”. “There’s definitely a queue out the door for this kind of product,” he says. ▲ The character property is in an enviable location within Elizabeth Bay and is fully occupied with a waiting list. “It’s a certain type of person that stays in co-living. They’re more transient than a normal occupier, but we find that it’s often people who are new to the country. “They’ve maybe stayed at a backpackers or shorter-term accommodation, and they’re looking for something a little bit more stable and private, that allows them to meet other people. “They tend to stay there for six months or so, and then maybe go and rent an apartment, so it’s a bit of a stepping stone for this property.” Wheatley said they were also looking at other opportunities around the Kings Cross area to expand their co-living offering. Regional motels tapping corporate market Carpe Diem has three multi-asset funds for regional accommodation, and a fourth fund, the newly inked living sector fund, with the Elizabeth Bay co-living property as the seed asset. “We started out looking at regional motels, focusing on larger country towns where there was a lot of corporate business,” Wheatley says. “We’re probably averaging 85 per cent occupancy across the whole portfolio. And the vast majority of that is corporate travellers on business to regional centres. “They bring work for 12 or 18 months, even longer, and we do deals with those entities and they essentially take the vast majority of our property. “We’re very good at doing the more corporate-oriented offerings and the returns on those are very good ... you can get double-digit yields. “We exited our Mildura property after 3½ years and doubled the value on it and got a 40 per cent IRR on it. That proves it up.” ▲ Seahaven Resort at Townsville is one of Carpe Diem’s Regional Accommodation Fund 2 assets. Self-managed super funds make up the bulk of the syndicated fund investors, according to Wheatley. Value-add and operational improvement opportunities are key to Carpe Diem’s investment thesis. “A lot of the properties we are buying are a bit run-down. We mostly look at bigger properties, and we love them when they’re underperforming or poorly managed, or if they present as visually unattractive, and we renovate them and improve their management. “There are clear, measurable ROI outcomes from doing that in terms of occupancy and room rate bumps.” While Wheatley says there is a “lot of opportunity and scope around the living sector”, build-to-rent remained the domain of institutional capital. ▲ Montpelier House offers flexible short-term accommodation with self-contained rooms and shared communal facilities. The Elizabeth Bay co-living asset is a character building that provides good amenities and location with communal living areas. But Wheatley says it may not always be co-living. “The location is sensational and we’re getting a very strong gross yield on [the asset],” he says. “There are all sorts of different value-add potential. Down the track, is that going to continue to be what it is today? Highly unlikely, I would think.” ‘We’re not flippers’ Wheatley says it may become apartments or a boutique hotel in the future. The property had prior approval to add two extra floors and a rooftop, but the permit has lapsed. “We’re just running it as is at the moment, but we bought five storeys in Elizabeth Bay for half of what a good apartment goes for,” he says. “We’re not flippers of real estate ... but we do think that it will be very hard to go wrong with an asset like that, and over time it will become more attractive to developers or alternative users who will see something else to do with it. “We’re not developers, we’ll let someone else take the potential cream on that. “It’s worth more than what we paid for it, and at some point in the not-too-distant future, maybe we will get a nice yield on it.” Wheatley says a lot of what Carpe Diem does is a six-year strategy aimed at providing returns to its investors. The real estate investment fund is now looking at assets to add to the Prime Living Fund in Brisbane, Newcastle and Melbourne, where low vacancy is providing strong fundamentals for rent price growth.

Queuing Out the Door: Co-Living Comes of Age

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