What is Co-living?
Co-living is not a new concept, communal living practices have been adopted in various forms across the globe for centuries. However, in its modern guise, Co-living refers to large scale, purpose-built residential accommodation in which residents live in studio style rooms with a typically larger provision of shared communal facilities than standard PRS developments.
Communal areas typically include a gym, shared kitchens, resident lounges and co-working spaces. Recently completed and proposed schemes also include libraries, spas, screening rooms, swimming pools, private dining areas and on-site restaurants.
It is typical for residents to pay an all-inclusive monthly rent which includes utilities, council tax, broadband, washing and drying facilities, as well as access to all communal areas. Tenancies are often flexible and residents can sign up for terms of between one to 12 months, with some operators even offering short term stays of between one and 90 days.
Who & Where?
The most active and well-known name in the UK Co-living market is The Collective, who opened the UK’s first and largest Co-living scheme at Old Oak, London in 2016. The company now has a pipeline of 8,000 rooms in the UK, US, Dublin and Berlin, with planning approved for over 2,000 rooms across five sites in London.
They are now being joined by a growing pool of investors and developers in the sector. Unsurprisingly, given the similarities with the Purpose Built Student Accommodation (PBSA) model, a number of entrants are established PBSA investors and developers looking to branch out into the Co-living market.
Crosslane Group announced a secured pipeline of 1,786 Co-living bedrooms across five sites in London, Manchester and Liverpool. IQ Student accommodation is developing over 600 Co-living rooms at Echo Street in Manchester, whilst Scope recently submitted plans for a Co-living scheme in Hackney.
Furthermore, US Co-living operator Common announced it is to bring its platform to the UK. With 13,000 beds in various stages of development across 20 cities in the US, the company is targeting an ambitious delivery of 10,000+ beds in London over the next five years.
The JLL European Co-living Index 2019 predicts that the European Co-living sector is set to grow from around 6,480 operational beds in 2019 to 20,400 by the end of 2021. London boasts the largest Co-living market in Europe with around 22% of the total number of beds, however investors and developers are beginning to target other UK & Irish cities such as Manchester, Glasgow, Edinburgh, Dublin and Liverpool.
What is the appeal?
The Co-living market is still very much in its infancy in the UK and whilst some scepticism certainly remains, there is growing momentum behind the sector and an increasing amount of interest from prospective residents and investors alike.
There are a number of drivers contributing to the sector’s growing popularity. A key macroeconomic factor is the affordability constraints of home ownership prompting many people to rent – the number of households in the UK private rented sector has increased by over 60% in the last decade.
Moreover, as modern cities become more congested the Co-living model offers a more land efficient alternative to traditional residential accommodation, with developers able to build more units per plot.
Increased globalisation and technological advancements have also created a far more globally transient workforce than previous generations. For someone new to a big city in a foreign country the appeal of a social, all-inclusive, flexible, high quality rental product is clear. The social cohesion encouraged within Co-living developments eases the challenges faced by people moving from abroad in establishing social circles in a new city.
The identification of Co-living in the Draft London Plan has signalled a renewed level of interest in the sector, with investors previously deterred by an unclear planning context now encouraged by attempts to establish a planning framework for Co Living.
The product will of course not appeal to all. There has been significant scepticism in certain planning departments and communities regarding small room sizes, whilst the style of living will not be to everyone’s taste. The model will also not work in all locations, certainly in the short to medium term large scale Co-Living investment is likely to be restricted to the largest city centres.
However, recent investment in the sector, coupled with strong initial resident demand, shows that Co-living schemes could have a role to play in the wider private rented sector in the future. Not as a standalone solution, but in supplementing traditional PRS, BTR and PBSA stock in supplying good quality professionally managed rental properties to a growing and increasingly discerning market.