Co-living has become an indispensable part of temporary housing. It has long since become a global trend and offers people, especially in urban areas, the opportunity to access affordable living space quickly and easily. In this co-living guide, we would like to list all relevant aspects and show the potential for project developers and operators that this form of temporary living has to offer.
In this article, you will learn:
- The important players in the co-living sector
- A comparison of rental periods, service and equipment levels as well as community offers
- What role co-living will have in the real estate industry in the future
In the age of digital disruption, new trends and technologies are constantly emerging that are shaping our everyday lives and changing the way we live. One of the most striking trends of recent years is the sharing economy, which has also arrived in the housing industry. In the concept of community living, people share common living spaces and other areas and services. In fact, co-living is not new but is – like so many trends – a recurring phenomenon.
The history of co-living
In the 19th century, co-living communities were organized in New York for women, in whose houses they found support, secure accommodation and jobs. Later, co-living was also offered to men. At that time, co-living was also used by travellers or displaced persons during the Second World War.
Boardinghouses (originally called “pensions”) have always been a good example of co-living. These accommodations were predominantly used by the aforementioned population groups and they created their own cultural “ecosystem”, consisting of a mix of different cultures and social norms of the residents. Modern co-living spaces are not so different from their predecessors in this aspect, as they also promote a gathering of people of all ages and cultures.
Today’s co-living trend
The fact that co-living is experiencing such a revival today is not least connected to co-working. Both movements spring from the same social trends, namely the tight housing situation, changes in the labour market, the furnishing trend and the changing lifestyles and mindsets of the Millennials and Generation Z. Where all these circumstances come together, exciting co-living concepts have developed in recent years.
Why is co-living ideal for the Millennial generation? One reason is that they stay single longer than previous generations. According to a Goldman Sachs study, the median age of marriage has shifted from 23 in the 1970s to 30 in the 2010s. Generation Y attaches particular importance to their independence, and the classic family image of a child, a dog and a home of one’s own has had its day for many. This not only manifests itself in relationships, but also in housing situations. According to a survey by Apartment List, 12.3 percent of American Millennials plan to live in rented accommodation for the rest of their lives and not to buy a home. The reasons? Real estate has become unaffordable for many people in the US and loans are too much of a financial risk in times of economic crisis. For this reason, they are forced to look for creative temporary solutions, of which co-living is one of the most attractive.
In addition, there is also a high degree of flexibility in the labour market. In the past, it was not uncommon to stay with the same employer for life, but nowadays, many professionals change jobs every few years. There are more and more commuters and more and more people who are becoming digital nomads altogether (estimated to be 1 billion by 2035) and are at home all over the world. It is precisely for such people that co-living is a very good way to find affordable housing quickly and flexibly.
The most important players in the co-living market
As part of a market study, Coliving Insights examined which current concepts exist on the market and how they should be classified. 25 providers were scrutinised, analysed and divided into four different categories:
This group includes established co-living brands with a strong focus on expansion. Their models aim to create platforms that are easily scalable. The following providers belong to this group:
- The Collective
This includes businesses that originally came from co-working or more traditional accommodation and are now moving to co-living. This group relies on pre-existing resources and operational frameworks designed for the long-stay segment. Movers include:
- Intentional “Urban & Remote
Operators in this segment represent a variety of intentional and impact-oriented models. This ranges from non-profit decentralized networks to commercial platforms. Here, a distinction has been made between “Urban” and “Remote”. The former are located in urban locations, while the latter operate in more rural areas as a so-called work retreat.
Intentional Urban includes the following providers:
- Embassy Network
- Open Door
- Urban Campus
Intentional Remote includes:
- Mokrin House
- Smena Station
Rental periods for co-living
Depending on the concept behind a co-living provider and the target group it is intended to serve, the rental period also differs. Some accommodations can only be rented for a few weeks, while others only allow their tenants to move in for six months or more. A high turnover tends to have a negative impact on the user experience, especially when it comes to long-term residents. However, most concepts are designed for a longer stay.
How much privacy do co-living providers offer?
A graphic can be used to illustrate the relationship between private and public space. It is a simplified view and does not take into account the size of the shared space per tenant. Basically, each tenant has different demands, which are also culturally influenced. For example, the Indian co-living provider Oyo offers the smallest private space with just 9 square metres, while twice this area is offered as shared space. The situation is different with Assemblage, an operator from New York City. Their flats are on average about 50 square metres in size and at the same time offer 9 times as much communal space. The majority of providers are between these two extremes.
Services & Equipment in Co-Living
The services and equipment of a co-living provider can be essential for the success of a concept. The study compares which services are offered and finds that there is often a veritable “arms race” between competitors – without regard to whether the services are really useful for the respective target group. This phenomenon is already known from the competition between providers of student flats in England. The so-called racing for amenities has made 4-star hotels look pale next to some student accommodations. Providers are indeed walking a fine line between what is really wanted and used by tenants and what can be sensibly and successfully implemented and offered. Almost all the providers examined to offer a communal kitchen, as well as co-working and events. However, very few concepts include a gaming room or a cinema.
In a co-living concept, communal offers and services naturally also have an impact on the rent. An overview of rental costs worldwide is provided, for example, by The Housemonk’s Global Coliving Report 2019. With an average rent of 175 US dollars, one pays the least for co-living in India. This also correlates with the distribution of space, where the Indian provider OYO offers the smallest private and shared spaces. Tenants pay the most in the USA, namely 1700 US dollars on average. In the metropolises of the USA, however, rents for co-living offers are thus even cheaper than for comparable one-bedroom flats.
Europe is in the upper midfield in this comparison. The cost factor of temporary living is a point that is often criticized. The rooms and flats are offered fully furnished, which is why the rental prices in Germany are higher than for comparable flats. Here, however, a recent study by Savills clearly showed that a tenant actually spends less for Temporary Living up to a living period of three years than for a classic flat. Since co-living is designed for a period of several months to a few years, the resident saves money in most cases, since there are no acquisition costs in furniture, kitchen and others.
The future of co-living
Co-living is here to stay. The diversity of offerings already shows how multi-faceted co-living accommodation is becoming. The funding rounds of The Collective, Zeus Living, Sonder and other operators show how much potential and dynamism there is in this segment. What is and remains important is the “experience” that is offered to the occupant. In addition to the location of the property, it is above all the quality of the offer and the quality of the furnishings that clearly set successful providers apart from the market. Co-living is formed between co-living / cluster living, serviced flats, co-living hotel and combines many aspects in its own way between micro-living, hotels and shared apartments. Space efficiency, urbanization, collaboration, community offers and community experience, sharing economy, mobility, new “mindsets” instead of thinking in terms of target groups – all this comes together in this form of living. This offers many opportunities for project developers and operators who want to gain a foothold in this area. The global signs and megatrends as well as the situation in the real estate market suggest that this form of housing will tend to gain in importance in uncertain economic times and could thus become a drawing card for the industry in the upcoming recession.