The traditional real estate rulebook is being rewritten by the pragmatic demands of a changing world. For decades, the industry operated in neat categories - hotels were for guests, apartments for residents, and offices for workers. Each had its distinct valuation model, operational structure, and design code. Today, that rigidity is dissolving, and the most successful assets are no longer those that do one thing perfectly, but those that do many things flexibly. The boundaries between hospitality and residential real estate are not just blurring, they are being actively erased by operators and developers seeking resilience in a volatile market.

Insights from Coliving Conference 2025 in Barcelona, Spain, where industry leaders gathered to examine the mechanics of this transformation. The consensus is clear - the future belongs to the multifunctional building. However, moving from a single-use asset to a mixed-use ecosystem introduces a layer of operational complexity that requires a fundamental rethink of how buildings are designed, funded, and managed.

The Demise of the Single-Demographic Asset

The convergence of hospitality and residential real estate is driven by a stark reality - the traditional demographic groups are changing. George Sell, Editor-in-Chief at International Hospitality Media, noted that operators are increasingly forced to “zoom out from pure coliving” to manage buildings that serve numerous audiences at once. This is particularly visible in the student housing market, where the pressures are acute.

Josephine Phinith, Global Business Development Manager at ICEF, pointed to a geopolitical shift redrawing the map of student mobility. With policy changes and safety concerns dampening demand of US, Canada, Australia, and UK markets, Europe has become a magnet for international students. Yet, the infrastructure is buckling under the weight of this migration. Phinith highlighted that Europe is currently missing approximately three million beds for international students, with cities like Paris seeing a 50% decrease in available student apartments in a single year.

For these students, the priority has shifted from university rankings to employability and return on investment. Students are now looking for networks, and a building that isolates students from the broader community fails to provide the professional mentorship and local integration they crave. The emerging solution is the mixed-use asset where students co-exist with professionals and tourists, obtaining a gateway to local culture that a campus bubble cannot provide.

Can Design Outpace Regulation?

While demand is fluid, regulation remains stubborn. In many European markets, planning authorities still enforce sizing standards based on outdated family models. Andreea Kaiser, Co-Founder & Group CEO at ALFA Development, described a “complete collapse” of the traditional family structure in the Nordics, where the majority of customers are singles or separated parents sharing custody. Yet, in markets like Denmark, regulations often mandate large average unit sizes-sometimes up to 95 m² - forcing developers to build apartments that are too large and expensive for the actual demographic need.

Kaiser’s firm navigates these constraints by offering small rental units and larger condominiums within the same scheme. By designating the smaller, high-demand units for rental and the larger, regulation-compliant units for sale, developers can balance the books. Through this, residents in smaller private units gain access to large communal amenities - coworking spaces, guest rooms, and wellness facilities - that compensate for the reduced private footprint. This approach turns the regulatory burden into a community-building feature, forcing interaction in shared spaces rather than isolation in oversized, empty apartments.

‍The Arithmetic of Hybrid Hospitality

The financial case for the multifunctional building rests on the ability to switch between asset classes, an example being blending short-stay hotel inventory with long-term residential leases. Giles Horwitch-Smith, Founder & CEO at res:harmonics, noted that buildings are increasingly operating with a fluid inventory, where approximately 20% of units might be allocated to short stays during peak seasons.

Short stays command higher nightly rates, but require intensive operational management. The commercialisation of residential assets allows operators to maximise yield during high-demand periods - such as summer tourism spikes or start-of-term university windows - while maintaining a stable base of long-term income. However, executing this requires the technological capabilities for dynamic pricing and predictive analytics. Operators must decide one to two months in advance when to release inventory to the short-stay market based on “pickup” data.

This hybrid model also acts as a powerful leasing funnel. Kaiser pointed out that serviced apartments within a residential scheme serve as a “try before you buy” mechanism. For example, a divorcee needing immediate housing or a professional relocating to a new city can test the neighbourhood in a hotel-style unit before committing to a long-term rental or purchase. It is a win-win situation, de-risking the decision for the tenant, while filling voids for the operator.

Operationalising the Human Connection

The risk of these mixed-use buildings is friction. Combining partying undergraduates with corporate travellers and long-term residents can cause operational headaches if not managed with precision. Phinith emphasised that clear marketing is the first line of defence - guests must know they are entering a student-heavy environment to align expectations.

However, technology alone cannot smooth these edges. While AI and automation are essential for handling the high turnover of short-stay bookings, by automating pricing, messaging, and referencing, the role of on-site staff has evolved from administrative processing to community curation. Kaiser argued that the value of human interaction remains the premium differentiator. In intergenerational schemes, where seniors live alongside young families, the role of the community organiser is to spark interaction - facilitating a running club or a coffee morning - rather than micromanaging the fun.

The goal is to create spaces that are adaptable. Horwitch-Smith highlighted the need for spaces that transform throughout the day, such as a coworking lounge by day becoming an event space or bar by night. This adaptability is critical for yield density, ensuring that expensive floor space is monetised 18 hours a day rather than just eight.

The Outsourcing Paradox

Perhaps the most counterintuitive trend in the new multifunctional asset is the move away from operating everything in-house. For years, coliving operators attempted to control the entire vertical, running their own cafés, gyms, and laundry services. The consensus is shifting towards curated outsourcing.

Operators are realising that a mediocre in-house café is a liability, whereas a vibrant local bakery is an asset. Kaiser noted that bringing in passionate local tenants creates a deeper connection to the surrounding neighbourhood than a corporate-managed amenity ever could. These commercial tenants act as anchors, drawing the public into the building and integrating the asset into the urban fabric.

This “porous” building model, where the ground floor is open to the public, solves a critical financial problem. When amenities are exclusive to residents, the cost is borne entirely by rents, pushing affordability out of reach. By opening coworking spaces, gyms, and bars to paying members of the public, the operational costs are subsidised by the community, allowing operators to keep residential rents competitive while offering premium facilities.

‍Embracing the Age of Flexible Living

The future of the living sector lies in the mixed use buildings that defy traditional zoning to serve students, young professionals, tourists, digital nomads, and families simultaneously. For decision-makers navigating this landscape, the path forward involves some distinct shifts. Success will come to those who can master the complexity of the multifunctional building. This means designing for flexibility from the outset, and embracing the constraints of planning laws to force a mix of accommodation types that serve both the balance sheet and the demographic of the community. The most successful buildings will be those that invite the neighbourhood in, leveraging local entrepreneurs to activate the ground floor and subsidise the amenity cost base. The urban revolution is not just about building new spaces, but building spaces that can do more.