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Insight – is co-living about to have its moment in the sun?

It’s threatened to be a thing for quite some time, but for one reason or another co-living has failed to catch on in any discernible way, and has often found itself swallowed up in the fast-growing Build to Rent movement.

It’s still not entirely clear what the distinction between the two models is, with both prioritising community, amenities such as gyms, workspaces and roof terraces, and a higher-quality renting experience.

Simon Bird, director at LOM Architecture and Design, says the co-living model – which has grown out of the BTR sector – could now be coming of age, though.


“These last few months of lockdown have been an opportunity for many to re-evaluate how they live, and how they want to live. What we require from a home has changed. While desirable locations are changing, so too is our idea of desirable housing. People have higher expectations around quality, amenity, and community,” he says.

(Pic: The Collective)

“(Co-living) developments give each resident their own bedroom and bathroom, and then access to communal dining areas, kitchens and lounges, with shared use of facilities including gyms, workspaces, bike storage, or roof terraces.”

He says co-living also gives residents the opportunity to live in a sociable environment, and to take advantage of a much wider variety of facilities than would be available to them in an individual apartment or flat share. 

“This is why I believe the model has a special relevance in a post-Covid world,” he adds. “We’ve all felt starved of that human connection during lockdown – co-living is an option that gives access to social events and communal spaces in a way that is unmatched by any other housing model. For a country on the brink of a loneliness crisis – many are crying out for a style of living that brings people together rather than keeping them apart.”

Working at a dinner table or in the corner of the spare bedroom can be isolating, Bird says, with  many co-living developments now aiming to counter this by offering specially designed co-working spaces, helping to ‘build back that workplace atmosphere’ while retaining the convenience of working from home. 

“There’s also the simplicity of the product,” Bird argues. “Renters are increasingly looking for ease, and a single all-in cost for accommodation is extremely attractive, with co-living rents covering all your bills, fast broadband, housekeeping, building management and maintenance, and the upkeep of on-site facilities.” 

For investors and developers, meanwhile, the scale of the schemes ‘allows for easier renovation and innovation’ when it comes to ‘incorporating newer technologies or smart living ability’. 

“With this scale also comes greater flexibility, and the ability to customise the design of the scheme much more readily than with standard conversions or new builds,” Bird says. “The spaces and facilities on offer can be specifically tailored to the demographics in the area – or to attract different and wider audiences.”

Bird believes that co-living products are going to be especially relevant to city centres as they look to reinvent themselves post-Covid. Co-living tends to appeal to a younger, urban demographic – who are typically willing to sacrifice a bit of private space to live in higher-quality accommodation in prime, city centre locations. 

“Co-living is an effective way to bring bustling, vibrant, residential hubs right into the centre of town – and to secure a return on investment even in these uncertain times,” Bird insists.

“Occupancy rates in co-living schemes remained high during the pandemic – in stark opposition to the flight to countryside family homes seen by those in more conventional rented accommodation.” 

Bird admits that there will always be some who are more suited to a flat-share, or studio apartment, but insists that co-living will have a significant role to play as we move out of this pandemic.

“Investors would be wise to sit up and take note,” he concludes.

Why is the co-living movement growing?

CBRE’s latest Europe co-living report suggests residential’s ‘sociable sibling’ is gaining momentum. Its study provides insights on the co-living sector in the UK and Continental Europe.

It describes co-living as an emerging asset class that offers ‘a blended solution of residential and flexible short stay accommodation’, arguing that co-living schemes create a ‘living experience as an active community’, as well as addressing some of the challenges faced by young people in an urban environment including loneliness and social exclusion.

The report highlights a selection of key cities that are responding to current demands from transient populations made up of students, single professionals and digital nomads with up-and-built co-living schemes.

The research also analyses the economic, social and market trends that are giving rise to this new living environment across Europe, with a particular focus on London, Amsterdam, Berlin, Madrid, Milan and Vienna.

In recent years, co-living has garnered significant interest from investors, operators and occupiers. In this sense, it shares similarities with BTR housing and purpose-built student accommodation (PBSA).

Like these other residential segments of the market, co-living offers private living space supplemented by communal areas. However, CBRE says co-living’s operating model differs in that it’s centred around the amenity and community offer.

Chiefly aimed at single professionals, but with no age limit, co-living aims to create an instant community for those ‘seeking open-minded friendships’. It also aims to provide an opportunity to live in city-centre locations that would usually be too expensive in the traditional private rented sector or to buy, although co-living developments have been criticised in the past for being too expensive and with rooms that are too small for the price paid.

Perks include flexible tenancies and monthly payments inclusive of bills, while no deposits, free broadband and laundry services often feature as well.

CBRE reports that changing patterns of work, rising loneliness, and the emergence of the sharing economy are making people re-evaluate the environment they want to live in.

Some co-living schemes offer co-working space, and with people increasingly opting to work from home, this will be an attractive facility, CBRE says, along with flexible contract lengths and a less onerous form of letting agreement than the traditional private rented sector.

What is driving demand?

Jennet Siebrits, UK head of research at CBRE, says the level of renting across Europe has risen to over 30%, with the factors contributing to this growth including rising unaffordability to buy, urbanisation and social changes, which are all helping to underpin strong demand for rental housing.

“In our research, we found that co-living monthly payments, often with bills and cleaning included, compared favourably against private rents in four out of six of the cities we focused on, making them attractive for young adults wanting to leave home and pursue their career in a city,” she comments.

 “The co-living experience can help tackle some of the challenges faced by young people. Our research found that loneliness is a problem across Europe; co-living seeks to address this by providing a social element and communal spaces, in order to foster friendships and networks,” she adds.

“Occupiers tend to be from the generation that grew up immersed in technology, and co-living operators are happy adopters of digitalisation. Co-living also allows occupiers to fulfil their sustainability goals by being a part of a shared economy, thereby reducing their carbon footprint.”

What about the impact of Covid-19? 

Jo Winchester, executive director of PBSA and co-living valuation & advisory services at CBRE, says: “With its private self-contained accommodation for sole occupants or couples, co-living is a more favourable environment for social distancing than living in shared rented accommodation. Operators adapted quickly to the situation this year, for instance implementing contactless delivery collection points and enhanced cleaning of communal areas.”

She adds: “Meanwhile, the community element to co-living hasn’t fallen by the wayside, in fact operators are reporting high levels of engagement in social activities on site, when these are permitted under local restrictions. Digitisation is enabling providers to implement government-imposed social distancing measures in communal areas and introduce 'virtual' social events.”

She argues that many co-living developments have high-speed broadband as standard, with some going further, offering co-working spaces and even coffee shops to support homeworking.

“This allows people to work effectively, while still staying connected and in easy reach of their workplaces and the social and cultural hub of the city centre for when restrictions ease.” 

How big is co-living in London? 

Typically, where the capital goes, others follow. So, if co-living is going to become more than just a niche trend, it will need to break the capital.

CBRE’s findings indicate that, overall, the co-living concept was similar in all the cities studied, but with variations in room sizes, typologies and the local regulatory framework.

Generally speaking, the co-living concept in London consists of a large managed rental scheme, comprising small private studio units plus large communal spaces. Typically, the communal spaces are made up of a gym, lounge areas, and often a food and beverage offering, while the inclusion of co-working space can be a key difference to other types of residential accommodation.

Residents pay an all-inclusive rent, which includes use of the facilities and all utilities, but they still have their ‘own front door’. Co-living usually involves a lifestyle element, with on-site management teams working hard to create a sense of community through organised social events.

(Pic: The Collective Stratford)

Licence-style agreements, rather than assured shorthold tenancy agreements (ASTs), are common, with contract lengths varying between 3-12 months and rates adjusted to different lengths of stay.

Winchester says demand for London’s co-living developments is supported by the high numbers of ‘single professionals and mature students in need of a flexible living option’, combined with a shortage of suitable housing.

“Operators and developers are increasingly bringing forward sites through a variety of planning routes, and for the first time the current version of the London Plan has a policy (H16) dedicated to ‘large managed rental blocks’,” she adds.

“Co-living operators are seeking to offer a genuine alternative to shared houses that are sometimes poorly managed by private landlords. Our research shows that co-living rents in key boroughs compare favourably to rents for private flats when location, the use of on-site facilities and bills are factored in.”

Despite this, co-living is still very niche in the capital – and even more so outside of it. An increasing number of investors and developers are getting involved in the market, but the most active major player remains The Collective – which has two schemes open in Old Oak Common and Canary Wharf (with 1,250 beds), and a large pipeline of sites across London in various stages of planning and funding.

(Pic: The Collective Old Oak Common)

This time last year, DTZ Investors (DTZI) and The Collective jointly launched the world’s first institutional large-scale co-living fund, with the aim of raising total equity commitments of up to £650 million.

The new fund – COLIV – was designed to acquire, or forward-fund, between six and ten co-living assets in London, with a target gross asset value of £1 billion over the ten-year life of the fund. 

Last month, it was revealed that DTZ Investors had forward-funded a 310-room co-living project in Earlsfield, in a deal requiring £70 million of total investment, with The Collective (the fund’s property and asset manager) building-out and operating the development on Trewint Street. Once complete, it will be the second asset in the fund following the forward-funding of The Collective Harrow, which was announced when the fund was launched in October last year.

Outside of that, the only other operational beds are at The Stay Club’s two schemes in Colindale and Willesden (170 beds), with the likes of Scape, Tide Construction, Yoo Capital, Common, Dandi, CoLiCo and Princeton Apartments all having schemes in the pipeline.

The success of these schemes will go some way to determining just how big co-living can become. At the moment, it remains very much a small-scale trend when compared to BTR and PBSA.

*You can find out more about CBRE's research on co-living and its key trends, as well as watch a webinar with a panel of experts from across Europe sharing insights from the report, by clicking here.   

Poll: Will co-living ever become more than just a niche - mostly London-based - trend?



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