Thought of the Week
Co-living: An opportunity to deliver for single renters?
November 7, 2024 3 Minute Read
Single-occupant housing is falling short
With the UK facing a housing crisis, looking at legitimate new housing typologies that might increase supply is more important than ever before. According to Experian, more than 50% of single-person working-age renters in the UK live either alone or in homeshares, but the supply of rented accommodation for single occupants is decreasing across the private rented sector (PRS) and in houses of multiple occupation (HMO). This is driving the need for a new residential product suitable for single occupants.
Co-living is a relatively new housing typology that is characterised by private rooms with enhanced design focused communal living facilities such as dining, recreational, and working areas. It could go some way to plug this supply gap, by providing dedicated accommodation for single renters.
Co-living also provides residents with a ready-made community, which is just one way that these models enhance the living experience. These community environments form a fundamental part of the Co-living offering and can go some way to resolve loneliness for their residents, which is more common in renters than in the general population (40% vs 29%). This demonstrates a holistic and innovative approach to single-renter accommodation, and a new choice for single-occupancy renters; one that isn’t offered by the traditional PRS.
There is proven demand for the Co-living product and renters are embracing the concept. For example, DTZI’s Folk Co-living schemes operated by urbanbubble have attracted strong demand; rapidly stabilising in just over three months after launching.
Location and design are key
The success of a Co-living scheme pivots around its location and design. Being centrally located and well-connected is fundamental, which aligns well with urban centres and employment hubs where housing demand is higher and supply more constrained. As a result, demand for schemes in such areas is driving rental tension.
Solid fundamentals are attracting institutional investors
Co-living is a relatively new asset type for investors to consider and institutional investment into the sector is nascent. But it’s unsurprising that interest in Co-living is growing, given that our 2024 European Investor Intentions Survey highlighted that residential alternatives remain the most sought-after asset types for purchasing. The fundamentals of the market are attracting interest and are promoting Co-living as a key part of the Living sector.
At present, UK investors are leading the way, with the market dominated by forward funds and mostly centred around London, with development opportunities now emerging in major regional cities. We think that investor behaviour towards the sector has mirrored that of the early adopters of Purpose-Built Student Accommodation. And of course, if this is true, and it continues to follow the same pattern, Co-living will become a key asset class.
Thought of the Week
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