The co-living sector has expanded in the past few years as more and more people stopped seeing it as a way of living suitable for students, but rather a way of connecting with one another. “There are more single households than ever before, and, unsurprisingly, people have never felt lonelier,” Esther Bahne, co-CEO & chief marketing officer of Berlin-based co-living operator Quarters, told Multi-Housing News.
Despite short-term concerns about the need for social distancing, people are still looking at co-living as a viable alternative. “It’s all driven by an oversupply of traditional luxury apartments targeted at high earners,” said Ryan Shear, managing partner at PMG. The company recently opened Society Las Olas, a 34-story co-living development in Fort Lauderdale, Fla., and the first project under PMG’s Society Living brand. In the interview below, Shear and Bahne share details about their journey into co-living and dive into the sector’s prospects.
What was the most challenging aspect of developing Society Las Olas?
Shear: With 639 units and over 900 beds, Society Las Olas is among the largest apartment communities ever developed. Then we add the complexities of fully furnishing three- and four-bedroom co-living spaces—rented by individual bedrooms that each have dedicated en suite bathrooms—and some of the largest and most-activated amenity spaces in the world. While the finances are similar to a typical downtown Class A high-rise multifamily project, embracing the unique layouts and brand focus on activating amenities takes extra care with institutional partners.
What is the concept behind your Society Living brand?
Shear: Society Living was created to deliver reasonable rents with stunning design, exciting amenities and a community-focused lifestyle in the most desirable locations. The business model is undercutting traditional luxury apartments while providing a more engaging and inclusive living experience. We’re all about encouraging residents to intentionally live somewhere that supports neighbors living their best lives.
What are your plans under this brand going forward?
Shear: Now that we’ve refined and proven our model in South Florida, we’re aggressively scaling nationally. Our acquisitions team is interested in sites in most major cities where we can build a dense high-rise close to all the action. We plan to build more than 7,500 units in the next five years in several major markets.
Co-living is about sharing, interacting and building a community, which conflict with current social distancing guidelines. How do you ensure safety at your properties?
Shear: Most people in our co-living units were already planning to live with roommates to afford to live where they want. We make living with roommates more private and hygienic by giving everyone their own bathroom in a brand new furnished apartment that’s cleaned regularly. All new roommates sign an addendum confirming they have no known exposure to COVID-19 and are following public health guidelines. Our management team strictly enforces physical distancing and mask-wearing in all amenity spaces. There’s hand sanitizer everywhere and we have obviously had to scale back plans for in-person community events until it’s safe to gather.
Bahne: The health and safety of our tenants is our top priority, and we are taking a range of measures to ensure a safe and clean environment at each of our properties. We have implemented an enhanced cleaning and sanitation schedule to ensure that all areas are frequently cleaned and disinfected with products compliant with the Centers for Disease Control and Prevention guidelines. Hand sanitizer stations are available throughout buildings—from the entryway to common spaces to hallways. And where in-person meetings have become unfeasible in our U.S. spaces, we’ve ramped up our ability to do virtual leasing, offering in-depth, 360-view tours to potential tenants.How can technology help? What are PMG’s steps in this direction?
Shear: We’re evaluating technologies like enhanced air filtration, ultraviolet lights that kill bacteria and antimicrobial materials. But the reality is the best preventive measures for housing providers are low-tech, like enforcing mask wearing and distancing, providing sanitizer everywhere and openly communicating about how we can best keep each other healthy by respecting neighbors.
Are there any smart home technologies that Quarters has implemented or intends to implement due to the health crisis?
Bahne: If anything, it accelerated our push to full digitization of our customer journey, so that everything can be managed through an app. Of course, customer check-ins and check-outs are already happening digitally. In Berlin, we have also piloted a range of smart home applications already, eliminating the need for any high-touch surfaces like switches and remote controls. Where some of these felt rather “gadgety” before, people may be more drawn to these going forward, so we are certainly looking into rolling more of these out.
What made you shift from cars to living spaces?
Bahne: My career has essentially revolved around two core topics: innovation within our urban environments, of which mobility and mobility infrastructure are key components, and responding to changing consumer needs by creating new, better solutions. I spent a lot of time thinking through how we as a car company interacted with cities and how we could contribute to people’s urban lifestyles in a positive way. This got me to found the start-up accelerator Urban-X, through which we invested in 46 companies, working on solutions for a better urban life. I built the community and coworking space A/D/O in Brooklyn, specifically for designers and creatives. In 2014, I started to work on a premium co-living brand, MINI Living, which launched its first building in Shanghai in November. I hugely enjoyed setting up these new ventures.
Meanwhile, we saw that owning a car became less and less relevant to people—calling for new, more flexible offers in mobility services. On the other hand, having a great place to live that was well-designed and affordable was, and is, top of mind for people, especially in big cities. Yet, while the car industry is undergoing sweeping changes and is updating its entire business model, few innovative solutions have taken hold in real estate so far. Now, I feel the sector is truly ripe for innovation, and co-living is a great product to introduce flexibility, services and experiences into the market. I am very excited to get to work on a product that’s so close to my heart.
Coming from Europe, how much of the European lifestyle can be found in Quarters’ U.S. co-living locations?
Bahne: It certainly informs our emphasis on community. In Europe, there’s a large emphasis on local retail and neighborhood shops that are foundational in building closely knit quarters and forging connections between neighbors and these businesses. We want to emulate this idea of small town squares in the U.S. by encouraging the Quarters members to come together not just with one another, but also connect with their neighborhood, ultimately making these large metropolitan areas feel special, comfortable and like home.
With this goal in mind, we extend the Quarters experience beyond our own four walls through a network of neighbors and partners we connect and collaborate with as a brand. For our members, that means getting to know a range of exciting local people as well as getting preferable access to spaces, programs and events across town. We see this integration into their new town as key to people sticking with us, extending their stay and recommending us to their friends.
Moreover, what further shapes our brand is that we are not just a European brand, but more specifically a Berlin-born brand. There is a certain edge to the city that still makes it a place like no other. This inspires our designers and membership experience teams to push for uniqueness in everything we do, and it inspires our tenants when they decide on a brand that fits their personality.
Are there any differences in co-living design between the U.S. and Europe?
Bahne: We don’t approach the continents with a bifold strategy. Rather, we look very specifically at each location. In each home, whether it’s in the U.S. or Europe, we tailor the design to the surrounding community. We want to capture and respond to the uniqueness, character and history of that city specifically and celebrate it throughout the building.
What do you consider to be the biggest challenge in designing co-living properties?
Bahne: In introducing MINI Living as a co-living product from a car company, the biggest challenge in establishing a premium brand in a new sector is to make sure the economics make sense—for the brand, as well as its partners, the developers and landlords.
Based on this knowledge, I want to now take our design, offer structure and customer experience to the next level, with a strong new senior team in architecture, design and branding, which I am onboarding right now. The goal is to establish the most-loved brand in the co-living sector and beyond.
Please expand on your strategy to create better housing solutions.
Bahne: Our lifestyles and priorities are changing dramatically. Homeownership has become out of reach for many, many people don’t want to buy and own lots of furniture anymore. There is more focus on sustainability.
We’re looking to address these issues. With co-living, you can provide more affordable housing options in some of the most competitive housing markets, while also creating spaces that forge new relationships, support the local community and pay a lot of attention to sourcing locally and sustainably.
Meanwhile, people’s expectations have risen dramatically. They are no longer content with getting a key to a box and then not hearing back from the landlord for the next 10 years. They want a similar level of convenience and services in their home as in all the other sectors of their life. Their tastes and preferences have been heavily influenced by the hospitality and travel sector.
READ ALSO: The Long View on Co-Living
What trends do you currently see in co-living?
Bahne: Before the pandemic, our ideal customer could be described as the digital nomad: a young professional that demands flexibility, on-demand services, works from anywhere and seeks connections to others. Now, that is literally everyone. We all work from anywhere. We have all felt isolated and longed for togetherness. And who feels like they can or want to commit to a long-term contract these days?
So, serviced community living on flexible terms is definitely the right answer for these times. For us, this means to think bigger and faster. We want to scale our current product both in the U.S. and Europe, as well as think through extensions of the portfolio, including more apartment types, more target groups and potentially shorter term stays.
In your opinion, what is the main reason behind co-living’s expansion in the past few years?
Shear: The word co-living is being broadly applied to encompass three trends: branded multifamily portfolios, catering to experience-driven lifestyle preferences and the rent-by-bedroom model. Co-living operators didn’t invent living with roommates. We made it better and packaged it as a standalone product: Instead of listing a three-bedroom for $4,500, we list three furnished bedrooms for $1,500 each. To offset smaller personal space, we design amenities that enhance daily living, like coworking spaces that serve as full-time office setups and gyms that replace private health clubs.
It’s all driven by an oversupply of traditional luxury apartments targeted at high earners. There’s not enough attainably priced and high quality inventory for people who can’t pay $2,000 per month or who simply want to live somewhere fun.
Why is co-living an alternative in a tight market, particularly in the current economic and health situation?
Shear: People are increasingly cost-conscious and co-living can be the best value for rent dollars. While the term co-living sounds scary in the context of a pandemic, the reality is it’s a better way to live with roommates. And in our case, you get a brand new building with opportunities to safely work and relax without leaving home.
What are your expectations for the co-living sector for the remainder of the year and beyond?
Shear: One of our advantages is that we develop these buildings with a singular vision from acquisition through construction and lease-up. That level of consistent control is unique.
Some companies that are glorified property managers are going to need to prove they can achieve outsized returns for owners. They’re claiming their brand and design drives leasing traffic, but it remains to be seen whether this traffic is qualified up to income and credit standards, and can really fill a big building with quality residents.
Others operating across many smaller scale projects will learn that the economics and resident experience are both challenging to scale across disparate sites. Operating consistently well in many small locations is challenging. You don’t have the amenities, management presence or volume of people to deliver on the marketing promise.