Investments in the Development of Coliving Projects in Portugal
The Coliving Format
Coliving is an accommodation format positioned between residential housing and hotels. It operates under a hotel license but allows for longer stays. The target audience includes digital nomads, relocators, young professionals, and students. Essential components include coworking spaces and a strong sense of community, which adds 20–30% to profits through guest loyalty.
- Compared to traditional rental housing, coliving offers higher rates at similar occupancy levels.
- Compared to hotels, it has lower operating expenses.
A hotel license enables flexible rate management and eliminates eviction issues common in long-term rentals across Europe. A Dubai-based project with 327 units achieved 90% occupancy within two months and maintained it even amid external political instability.
Why Portugal
Portugal combines the stability of a European jurisdiction with double-digit growth in tourist arrivals. The number of tourists and residents from the United States has grown by 250% since 2019. The market is not yet saturated, unlike Spain. Meanwhile, in central Lisbon, rental yields for completed projects are only 2–3%, which is why plots have been chosen in emerging locations with growth potential.
Two Projects
- Lisbon (Trafaria). A new development on the banks of the Tejo River, 15 minutes from the city center. A surf beach is 10 minutes away. A construction permit has been obtained. 120 units, indoor area — 5,570 m². Amenities: a restaurant, coworking space, rooftop pool and bar, private courtyard. Budget — €24.8 million. Capital to be raised — €5.4 million. Target annual return — 23%, return of capital — 90%.
- Porto (Vila Nova de Gaia). A former Taylor's port wine warehouse in a prime location, five minutes from the riverfront. The facade and vaulted ceilings will be preserved, and barrels will remain as part of the design. 130–147 units planned, indoor area — 5,000 m². The main preliminary document has been approved; a permit is expected within one year. Budget — €25 million, capital to be raised — €5.5 million. The return is higher than that of the Lisbon project due to the earlier entry stage.
After stabilization, annual project revenues are: Lisbon — €2.2 million per year, Porto — €2.6 million.
Investment Structure
The investor does not purchase real estate directly but acquires a stake in an SPV company formed for a specific project. Funds are used solely for that project’s needs. Minimum investment — €500,000. Time horizon — 4–5 years. The main profit is generated upon the sale of the stabilized asset to institutional funds at a target capitalization rate of 6%. The current rate for hotel projects in Portugal is 5.75%. Operating profit during the management period goes toward servicing bank financing. The developer remains a co-investor until project exit.