Cushman & Wakefield Sees Co-Living Tipping Point

In a new report, the brokerage finds this niche asset class to be approaching the critical mass needed to attract significant institutional investment.
Image courtesy of Common

Major co-living operators currently have more than 4,000 beds, plus well over 9,300 beds in the pipeline, according to a new report by Cushman & Wakefield which finds that the niche asset class is coming of age.

Eight of the top operators in the space have a total of more than $2.6 billion in operations and property funding, the report finds. These companies include Bungalow, Common, Hubhaus, Ollie, Quarters, Starcity, The Collective and X Social Communities.

Cushman & Wakefield’s report surveys the burgeoning co-living scene and finds a confluence of drivers for the property type, from a nationwide housing crisis to a growing preference for flexible living arrangements among debt-strapped Millennials.

The brokerage reckons that settling into a co-living property can be up to 20 percent cheaper than living alone, when all the amenities and perks typically provided by such facilities are accounted for, such as fully furnished units, hosted community events and, in some cases, housekeeping.

At the same time, real estate owners can generate more revenue per square foot by squeezing residents into smaller spaces. The fact that this model could be seen as a win for both sides helps explain why an array of high-profile investors are backing co-living brands, including Aviva Investors and the Texas Employees Retirement System (Ollie); Raven Capital Management and Property Markets Group (X Social Communities); and SoftBank (WeWork sister brand WeLive).

Multi-Housing News recently spoke with Ollie co-founder Chris Bledsoe, whose shared living firm has around 30,000 beds planned or in discussion with more than $10 billion of total project capitalization.

Proving the concept

Within the U.S., Cushman & Wakefield sees the highest concentration of co-living spaces in New York, Los Angeles, Chicago, Boston, San Francisco and Washington, D.C., and predicts that significant amounts of capital will be deployed to deliver thousands of additional beds around the world over the next five years.

The agency argues that co-living is reaching a tipping point where the niche asset class may begin to attract deep-pocketed institutional investors who like the model and are sold on the idea of massive worldwide demand for shared accommodation.

It helps that a proof of concept exists in the form of a successful exit for British and Singaporean investors in Collective Old Oak, a 546-bedroom co-living development in London. The private investors who helped fund the development sold off their 75 percent stake to UK startup The Collective for $162.5 million.

Cushman & Wakefield eschews the term “micro-units,” which has no clear definition and carries possible negative connotations, in favor of co-living, which the report defines as “a type of intentional community of housing where multiple people share a single home with shared areas such as bathrooms, kitchens and living rooms as well as other amenities.”