As the rent rates skyrocket every day continuously in cities like New York and Denver, more people are starting to seek affordable renting options. Co-living is one such modern option that has become the town’s talk.
What is Co-Living?
It is a type of intentional community housing where many people share a single home with common areas like kitchens, living rooms, and bathrooms with other standard amenities like security.
The modern millennials of New York city started choosing co-living over individual housing or multi-family properties due to the increased rent. They sought affordable renting options that did not skimp out on living amenities and the overall standard of living.
The co-living is now seen as a multi-family properties sub-sector and is emerging as a highly favored and fast-growing niche asset class. The co-living community is highly concentrated in cities like New York, Chicago, Boston, San Francisco, Los Angeles, and Washington DC.
Why is Co-Living on the Rise?
There are plenty of reasons why tenants choose co-living. First, flexible lease terms are one of the most primary reasons people select co-living, especially in the wake of the pandemic. A sense of community belonging and inclusion are also significant reasons people choose co-living over individual housing.
Besides, the work-from-home or anywhere culture is on the rise after the pandemic. It has also been found that people want to work in a community rather than working from the comfort of their houses. Most of the tenants who prefer coliving are tech-savvy and who enjoy the operating systems that co-living facilities provide.
Standard amenities of co-living, including advanced security systems and mobile applications for maintenance and billing requests, have become a norm, bringing ease of usage and convenience for tenants. Thus, when millennials think about co-living, it is not just about the affordable prices they come in but also the ease of living and operation.
The cost of living in a Co-living shared community is much lesser than residing in an individual apartment – which is approximately 25% lesser. Secondly, the individuals who choose to call also so do it for the benefit of network building.
In a world taken by storm by work-from-home and work-from-anywhere culture, it has become more critical than ever for individuals to surround themselves with the right people for personal and professional growth. Living alone in an individual apartment has much less to offer than living in a Co-living shared community.
The Co-living communities are like an office building with a curated community, fosters inclusivity, and enables tenants to meet diverse groups of people, allowing them to expand their personal and professional network.
The co-living firms are coming up with innovative ways to improve the network amongst their tenants by hosting get-together events and group activities within the Co-living spaces, thus providing tenants to know each other and interact with everybody.
This relationship-building has become more critical than ever in a COVID-19 truck scenario where most people are away from their families and even friends sometimes. Essentially, the co-living spaces are promoting the principles of – a home away from home.
The next reason why tenants choose co-living is the ephemeral nature of community renting. The gen-Y tenants are predominantly single, and there constituting antic experiences, which also provides them with lots of flexibility. The rise of location independent entrepreneurs is also something that has contributed to an increase in Co-living spaces.
Thus, a person could be working from anywhere and running a business based out of another city by working remotely. Search location independent entrepreneurs are continually seeking rental options that are affordable and that allow them to network as they move from one place to another.
The Gen-Y tenants do not very appreciate the thought of settling down in a particular city. This has also contributed to the rise in the number of digital nomads who adopt a laptop lifestyle and work remotely from anywhere without being tied to geographical boundaries.
Additionally, another major contributing factor to the rise in the number of co-living spaces is that most co-living firms allow their tenants to move into any of their company-owned buildings throughout the country.
Thus, tenants don’t have to keep looking for new places as they move around in the different cities of the state and can just stick to the options that they already have.
This ease of convenience and operation is something that the new generation is always looking for. This is a huge contributor to why people choose co-living spaces and are also sticking to living in co-living areas for a long time.
The prevalent features amongst co-living firms are fully furnished rooms with integrated bathrooms, kitchens, washers and dryers, cleaning services, all-inclusive bills, mobility, gyms, group events, and catering events.
In essence, a tenant is getting an array of benefits for sharing their common areas and all of this at a fraction of the price compared to multi-family properties or individual housing options.
Here’s what Susan Tjarksen, the Managing Director of Cushman & Wakefield, had to say about why people are choosing co-living: “The way we live is changing.
Goals of homeownership and the suburban lifestyle have given way to more open and communal preferences for those entering the workforce. Co-living options will become more ubiquitous with recent college graduates seeking to join a community and learn about a city they live in for the first time.
As new generations enter the rental market, preference will be centered upon coliving brands that provide convenience, affordability, and a vibrant community.”
The critical take-away for CRE investors?
Multi-family properties and individual housing are slowly becoming the thing of yesterday. New commercial real estate investors have something more to look forward to. Investing in co-living spaces at this hour is a highly lucrative one and that which has long term benefits.
The scope of house owning is slowly starting to fade away. Most of the population is looking forward to affordable housing options that provide convenience and a sense of community, inclusion, and belonging. The demand for co-living spaces is proven.
Additionally, since there is a lack of supply despite the market expansion, there is more scope for new investors to use this opportunity and enter the market during this inflection time. The co-living space is a relatively new and small arena and will have an enormous impact on the coming generations.
Commercial real estate investors have to know that this impact will soon shrink with time as more co-living companies emerge and more prominent institutions with huge capital enter the competition.
Hence, this is the right time for investors looking to invest in something new and trending before the big players come into the picture. Since multi-family operators have always sought a model that can optimize per square foot rent, the Co-living space allows them to enjoy substantially higher rents per square foot while still providing a much affordable option for tenants.