Rental prices are soaring in prime cities around the world, as young professionals in New York, Hong Kong and London struggle to find the right accommodation within their budgets. This has brought a rise in demand for co-living concepts and supports their success in recent years. Common, a co-living start-up, received almost 10’000 applications for their 9 residential buildings in 2016 and currently receive 300 applications per week.
This new living concept, dubbed a “dorm for grown-ups”, targets single millennials in the workforce and gives them the unique opportunity to join a community. It is a contemporary form of housing that integrates shared spaces between all members and encourages social interactions and a collaborative environment. As per Wired Magazine, “60% of 18 to 34 year-olds told the Mental Health Foundation they felt lonely often or sometimes”. This “loneliness epidemic” is being overcome by shared spaces.
Co-living buildings rent their spaces at a more affordable price than standard apartments or serviced residences offering similar amenities, especially in high density cities. Many graduates and entry-level workers have significant student loans to pay off and are seeking experience over ownership and long-term commitments.
Renting or leasing a standard apartment comes with certain burdens including utility bills, maintenance costs and everyday chores. Co-living communities liberate tenants from quotidian concerns by charging a one-off, all-inclusive fee, similar to that off serviced apartments or hotel residences. In a co-living community tenants are not responsible for the financial commitments of their roommates and receive cleaning services in communal areas. Some buildings include 24/7 maintenance and a concierge system to make sure all inquiries and issues are solved promptly.
At TFG Asset Management, we oversee both residential and hotel properties. New co-living buildings introduced by companies like Common or WeLive are categorized as blended properties. Although their assets are considered to be residential, most of their services and amenities are on par with those offered by hotel apartments. It is interesting to see how this concept is bridging the gap between hospitality properties and residential properties. With co-living properties differentiating themselves by imbedding a culture of community, it is fair to ask if hotel apartments/residences could follow suit by implementing some of these ideas in order to offer a similar yet more refined proposition.
The idea of co-living residences are also appealing to developers as they are able to build more units into the area plan. Building costs may be higher as additional bathrooms and communal spaces need to be constructed but these are balanced with the additional rental income obtained from having more units in a building. Therefore, although rental prices are lower there are more rental payments to be collected, improving the overall bottom line results. A mistake many co-living start-ups have made is that instead of developing a co-living property from scratch, they have decided to convert an existing product into a co-living space. This ends up being more expensive and inefficient for them as they are unable to take full advantage of the surface area to fit as many units as possible.
As an asset manager, there are certain particularities that come with managing a co-living property. Firstly, it is expected that tenant turnover is significantly higher than that of standard residences, and the biggest challenge will be to replace tenant exits. Converting short-term renters into long-term tenants will be a priority for the management team as they deal with a younger and more mobile target audience. Another particularity will be the special attention that would need to be given to communal areas. All maintenance and utility costs of these areas fall under the supervision of the building management, and will certainly be higher than those of standard residential properties. The final consideration will be the management of the “community”. Tenants of co-living spaces have overall expectations of the community in the building, and it must be ensured that this community grows and interacts with each other.
The growth in popularity of the co-living market and the number of properties in the pipeline shows that there is an underserved market in the housing sector. This market consists of people who live with roommates and share housing with others. At TFG Asset Management we are always looking at innovative trends in the market to determine the best offerings and those that guarantee the highest returns for our clients. As co-living moves forward, it will be interesting to see if it can be translated to the hospitality sector and if it can be introduced in the UAE housing market.
07/02/2018 - Featured InfographicsNEST is awarded by HSMAI
06/02/2018 - Featured InfographicsHR Optimisation in Hotel Property Management
05/02/2018 - Featured InfographicsAsset Management Guide Operator Search
04/02/2018 - Featured InfographicsTFGAM properties awarded Green Key Certification for second year running
31/01/2018 - Our Portfolio Updates