LISTEN Industry professionals say the co-living sector has been given a new lease of life following the pandemic, and momentum is building in the emerging sector.
At LREF, EG sat down with Simon Scott, lead director of living capital markets at JLL, as well as Adina David, executive director at MGT Investment, Charlie Gaynor, managing partner and co-founder of Re Shape Living, and Jonathan Lacey, head of acquisitions at Watkin Jones. Our guests discussed where the opportunity is for co-living and how the market might evolve over the next decade.
“It is early days for the co-living sector but going back to pre-pandemic the momentum was building,” said Scott.
“There was a sort of apprehension around the environment that we had to work through, which raised scepticism.
“Looking ahead, I think we’re back into momentum building again, putting aside all the challenges of the financial environments in which we’re working and pricing uncertainty and marking to market and all those sorts of things in what is still very much an emerging sector.
“This is the time when the co-living market will really start to evolve.”
Data-driven evolution
The sector has evolved to the point where the first movers now have data on how co-living assets are performing and what tenant demands are for schemes.
Gaynor said: “As more co-living assets come through the pipeline, it’s giving investors a lot of confidence to be able to walk through these spaces and get a better understanding of where co-living can have an impact and the gap in the market that it’s addressing in terms of operational beds in the sector.”
Gaynor believes the sector is further evolving as more second-generation stock comes on to the market. Re Shape worked with Crosstree Capital on the Ark, its first hotel-to-co-living site, when it acquired the Kelaty House Wembley from Watkin Jones.
The growing popularity of co-living has encouraged local authorities to get to grips with the sector, which in turn has aided in acquiring planning consent for the asset class.
“Where you’ve had challenges in some of the regional markets over the past couple of years, that’s now started to move on,” Lacey pointed out. “Birmingham has now got a supplementary planning document, which is expressly talking about co-living and some of the design standards that they have.
“Leeds is working on its own one at the moment, which is due to come in soon. That’s going to help to further expand [the sector]. And that is shown in the growth in the pipeline that there is from a planning perspective. You’ve currently got an excess of 20,000 co-living units within the pipeline, which is four or five times the amount that is currently operational.”
Tenant pool evolution
Many co-living schemes were designed to attract young professionals wanting to live in city centre locations. But as the sector has evolved, so too has the tenant pool.
MGT’s David said: “There are a lot of single-person households in cities and they need places to live and are finding it really difficult to find affordable and attainable homes. Co-living can provide a great solution to this.
“The sector has evolved a lot over the past few years and it’s demonstrated that the fundamentals for it are strong. The opportunity is pretty big and it’s quite a compelling investment story.”
Gaynor added that Re Shape’s primary audience is also single-occupancy households. He said: “We’re targeting young professionals between the ages of 18 up to 35. We do have a cohort of students that live in our building.
“However, 25% of our tenants are over the age of 35. So it does also cater to a slightly older audience that may be all kind of using it as a pied-à-terre or moving between spaces.”
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