Co-living supply is set to nearly triple to more than 20,000 beds within the next three years, based on the current pipeline of developments.
According to Knight Frank’s Co-Living Report 2024 the sector is poised to see a surge in both delivery and investor interest, pointing to significant growth potential for the “nascent but emerging asset class”.
There was a 65% increase in new beds delivered in 2023 compared to the previous year. This brought the total number of operational co-living homes in the UK to 7,540, representing a fivefold increase since 2019.
However, the current delivery accounts for 0.4% of the potential target market, which Knight Frank said highlights the “enormous scale of opportunity for developers, investors, and lenders in the sector”.
Since 2020, investors have spent nearly £1bn on acquiring or funding co-living developments.
Knight Frank’s UK Living Sectors Survey said that the trend is set to continue. The report surveyed institutional investors who currently own more than £75bn in living sectors assets across the UK and 45% of them plan to have invested in co-living by 2028, up from 32% of respondents who had already invested.
The report also revealed that co-living is appealing to a diverse demographic, with 72% of current residents aged between 26 and 40.
This demonstrates that the sector is meeting the housing needs of young professionals and not just students or recent graduates. The largest proportion of residents, up to 35% fall within the 31-35 age bracket, further emphasising the sector’s appeal to established professionals.
The report also said that while London dominates with 74% of complete co-living development, the pipeline is expanding to other markets.
Manchester, Liverpool, Sheffield, and Birmingham are leading the way in regional cities, thanks to their large and growing populations of young professionals, strong graduate retention rates, and expanding employment markets.
Co-living offers a more affordable option for private renters. In London, co-living rents are targeted at a 7% discount versus all-in costs of living in other private rented sector accommodation, and a 14% discount relative to multifamily homes.
Oliver Knight, head of residential development research at Knight Frank, said: “The potential market for co-living comprises 1.7m individuals currently renting in shared accommodation in urban centres across the UK. The co-living sector’s growth trajectory is impressive, with a fivefold increase in complete homes since 2019.
“This rapid expansion in supply reflects the sector’s growing maturity and its ability to meet evolving housing needs. As larger schemes come to market and institutional investment increases, co-living is cementing its place as a key component of the UK’s wider rental landscape.”
Knight said that the sector was being driven by a clear and deepening supply/demand imbalance for homes in towns and cities across the country, increasing population, urbanisation, decreasing household sizes, and shifting consumer attitudes.
He added that affordability constraints for potential first-time buyers had also increased the demand for rental housing and supported rental growth.
Oliver Heywood, partner in the residential investments team at Knight Frank who specialises in co-living, added: “The surge in institutional interest in co-living is a clear indicator of the sector’s potential.
“As more investors recognise the value proposition of co-living, we expect to see continued growth and innovation in this space, particularly in urban centres where housing demand remains high.”
Photo © Cottonbro/Pexels
Send feedback to Akanksha Soni
Follow Estates Gazette
