Co-living companies plan to open more than 55,000 beds in the next few years and have raised hundreds of millions of dollars of equity to meet their expansion targets. Institutional investors have taken notice and interest by traditional real estate buyers is rising rapidly, says a report from CBRE and Streetsense.
The emergence of co-living communities over the past few years has largely been a response to rising housing costs and need for more affordable housing options, especially in major U.S. markets attracting young professionals from other parts of the country. Co-living offers a less expensive alternative for young adults — typically targeting 25- to 35-year-olds, though not limited to this age range. Co-living appeals to many because of its upscale amenities and finishes (without the commensurate upscale rents), and its leasing and move-in flexibility.
Modern co-living properties are much like student housing for young professionals. They are purpose-built or renovated multifamily assets designed around several unrelated individuals sharing an apartment unit, sometimes referred to as a “pod.” The residents — usually four to eight to a unit — typically have private bedrooms and share common spaces, including kitchen, dining area, living room and bathrooms. Co-living communities can be standalone or a section within a larger conventional multifamily property.
CBRE Research found the United States had more than 5,000 beds in roughly 150 modern co-living communities at the end of 2019. While the total is still small, it represents significant growth. Four years ago, there were only a handful of co-living properties in the country. Industry interest in co-living is vast despite the small size of the product inventory.
The report points to strong tenant demand and investor appetite, noting that vacancy rates are lower than 3 percent, with long waiting lists and applications far outpacing available units. Not surprising when you consider that Pew Research found in 2017 that 31 percent of the U.S. adult population was sharing a home with someone they are not romantically involved with.
The largest operators in the co-living space — all with more than 400 beds — include Common, Ollie, Quarters, Starcity and X Social Communities. CBRE Research has identified more than 40 smaller and mostly regional operators that have emerged in the past few years as well.
New York City’s Department of Housing Preservation and Development announced a pilot program competition, ShareNYC, that will provide developers access to public funding for more affordable co-living projects. Common, one of the biggest co-living players, won this competition with its East Harlem location, which will feature 253 beds of affordable co-living designed to suit a variety of incomes.
The report says the popularity of co-living has been bolstered by the “subscription economy,” with more consumers becoming intrigued by bundling living amenities like utilities and wi-fi. Most offer everything from the basic necessities to kitchen appliances, furniture, and even towels.
Move-in ready concepts like San Francisco’s Starcity allows the resident to arrive with nothing but a suitcase.
To read the complete co-living report by CBRE and Streetsense, go to this link: https://bit.ly/32e91eK.
Mike Consol (m.consol@irei.com) is editor of Real Assets Adviser. Follow him on Twitter @mikeconsol to read his latest postings.