Co-living: affordability, cohesion, quality

In the European Living Investor Survey by JLL & Aberdeen Standard Investments, the very positive view of co-living from 2020 was somewhat clouded in 2021. Still, around 10% of investors want to expand into the co-living market and 59% believe that more activity will occur in this emerging sector this year. It was estimated that more than 23 000 co-living beds were either constructed or under construction in European cities and there were 61 co-living operators in the world. Meanwhile, Statista has ranked 2021 investment prospects in the European Co-living sector at 3.47 out of 5, before student housing (3.46) and serviced apartments (3.33). The co-living sector has been held back by regulatory constraints, uncertainty, operational intensity, and a lack of market liquidity. Yet, we show in this report that several factors - post pandemic economic struggles (affecting especially young, less experienced people), continued migration of the young talent to cities, housing shortages in metropolitan areas – will further accelerate the need for affordable, shared, quality living alternatives. New living options are increasingly at the centre of policy debates with co-living potentially being a solution to the housing crisis. Co-living guarantees simplicity and flexibility and aims to ensure i/ economic opportunity, ii/ social cohesion, iii/ health and well-being and iv/ environmental sustainability. All things considered, co-living offers sustainable, affordable housing alternatives, optimizing the use of available spaces. At the same time the concept of co-living resembles the one of coworking as it creates an environment that supports collaboration, innovation, knowledge, ideas sharing, entrepreneurship and promotes social interactions. Rising interest in colocation properties (especially among young professionals) along with comparatively competitive rates on return are promising for the sector’s expansion. The co-living yields appear to offer a 25 to 50bp spread over multi-family yields and co-living, unlike the traditional rental market, is not subject to any price regulations imposed by governmental authorities, making the sector less risky for investors. For more insights on the co-living sector please see our report: Co-living: affordability, cohesion, quality.