According to JLL, $800 million has been secured in the US, with $283 million in the pipeline which says rising prices in America’s major cities has seen dorm-like communal living become more commonplace well into adulthood, and investors are taking note.
The coliving concept has moved from a small group of apartments with rooms and common areas, to an asset class with amenities that resemble conventional class-A multifamily or student-housing sectors.
David Martin, who co-leads JLL’s U.S. multifamily investment sales platform, explains:
“In a very short period of time, a whole new class of multifamily residential assets entered the market. The sector is receiving a lot of interest. The coliving trend is absolutely tied to affordability in major markets. We see rapid growth in cities that are economically prosperous, particularly gateway and unaffordable markets. There’s a change in the ideology of residents there.”
Although coliving is deemed most suitable for young professionals, operators target a wide demographic. Ideally, tenants are between the ages of 25 and 50 and earn $40,000 to $90,000 a year, according to JLL’s Shawn Lambert, a research analyst. Crucially, they also may not be able to afford their own one-bedroom apartments in America’s increasingly expensive cities.
The lack of affordability is typically more acute for younger generations, the target demographic for coliving operators, JLL says. Coliving operators are expanding in cities where average rents are far above average incomes. In the U.S., established operators like Common, Ollie, and Medici specialize in denser communities of comparable quality to the kind of class-A multifamily buildings in the same neighbourhoods that can cost up to three times as much.
Tenants have shown they are willing to pay a premium for the convenience of flexible lease terms, furnished units, housekeeping, fitness centres and coworking spaces, all one place and for one price. This means that floorplates are increasingly dense – bedrooms can be as small as 100 square feet, JLL says. And investors are seeing the benefits of the economy of scale.
At the moment, new ground-up coliving development accounts for about 60 percent of the market. That’s expected to rise given recent investments and desirability to build coliving at scale, according to JLL.
As coliving demand rises, “more tested coliving operators can get to the table with major developers in early stages of development and discuss what tenancy, floorplates and returns would look like,” Lambert says. “This is truly a consolidated market for investment grade product,” he says. “Investors are beginning to see coliving as a tested niche subsector, comparable to student housing.”