Co-living accommodation is a relatively new arrival on the property market. Here’s a simple explanation of what co-living is and what it might mean for investors, agents and others in property.
What exactly is co-living?
Co-living is a type of rented residential accommodation where residents have their own flats or apartments but the block also contains various communal amenities for the use of all the residents.
Typically co-living developments will offer small, individual studio flats or larger shared flats. The building will also offer amenities such as residents’ lounges, gyms, cinema rooms, communal garden areas and possibly co-working space.
On top of this, co-living accommodation may offer various social activities too, such as exercise classes and hobby classes. There will normally also be an onsite manager or concierge to run everything.
In some ways, co-living accommodation is similar to modern student halls. But they are not student accommodation.
Who is co-living for ?
While co-living developments are usually available to everyone of any age they are particularly aimed at young, single working professionals. Co-living accommodation developments often don’t accept students, however.
The typical tenants for whom co-living accommodation is intended are those who will have perhaps lived in student halls or shared houses while at university. So the idea of living in a shared, sociable environment is not only familiar but attractive to them.
Co-living accommodation is almost exclusively located in large town and city centres. That is places where other types of accommodation may be expensive and in short supply, and where there are large transient communities of young, single people rather than families.
The advantages of co-living
Co-living will most likely appeal as a lifestyle choice to those tenants who are attracted to it. Many will see the advantages compared to living alone in a small flat in a big city.
Co-living properties often cover everything, including rent and all bills, in one weekly or monthly fee making it easy for residents to budget.
This type of accommodation is usually let on an easy in-easy out basis. Tenants can stay for a few weeks or a few years and there is often no fixed commitment.
Why are co-living developments being built ?
Co-living developers appear to be responding to a shortage of, and the cost of, accommodation in some places. They see a need for high quality, cost-effective accommodation especially for young workers who move around often.
Co-living is also seen as an increasingly attractive asset class for property investors and developers. It is seen as higher yielding than conventional buy to let and even build to rent flats or student accommodation. It also offers an ongoing revenue stream from managing the accommodation.
It is said that co-living is viable in places where, due to land and build costs, conventional flats would not be.
Will co-living really take off in the UK ?
It’s important to note that co-living is a relatively new concept in the UK. There are only a small number of co-living schemes in operation so far, though more in the pipeline. It is reported that US-based co-living operator Common has plans to develop 10,000 co-living beds by 2025 in London alone.
Co-living is much more established in other cities worldwide, particularly in New York, Los Angeles, Amsterdam and Berlin. (Although those cities have very different property markets to the UK anyway.)
While co-living is attractive to many tenants it is not necessarily cheap. It often works out more expensive than other types of accommodation.
Local authorities are often not that enthusiastic about co-living schemes being built in their area. Because it is so new most local authorities do not have a planning policy relating to co-living planning applications. Some have expressed concerns about whether co-living offers enough space, about the density of the developments and the impact on Council Tax revenues. These schemes do not usually contribute to affordable accommodation targets either.
Covid has also cast some doubt on the development of co-living in future. The trend is towards having more personal living space, not less.
Co-living and the challenges for investors and agents
Private landlords and agents are in competition with co-living properties for tenants in some cases. Co-living properties are often brand new and feature attractive contemporary design, décor and furnishings. They are usually marketed very professionally. They can be highly attractive to their target tenants.
Private landlords are in a very good position to compete on rents, however. A room in a shared house rented from a private landlord will generally be much cheaper. However landlords should aim to make sure their product is as attractive as it can be, and aim to provide a good standard of accommodation and amenities at their particular price point.
Agents should ensure that accommodation that may be in competition with co-living accommodation is well marketed, and that they make the renting experience as easy and appealing as possible.
Investors and agents in all urban areas ought to be aware of what co-living properties might exist in their area and what kind of product they are offering at what rents. They should also keep up to date with any new co-living schemes that are being planned, since they could have a direct impact on their local markets.