• Demonstrated COVID-resistant rental and transaction markets,
  • Combines living, community and services with the use of technology,
  • With low supply and increasing demand

What is Co-Living?

Co-Living is an innovative living concept that creates a balance between the value of individuality and community. The providers design living space with individual space, which are supplemented by common areas. The latter are typically the kitchen and common lounges, but can also include fitness room and a rooftop terrace. The added value is usually also increased through the use of technology and apps, which can replace the room key and offer community features.

A shared living space that improves quality-of-life for its residents. The communal nature of this housing arrangement involves pooling [community] resources and living in close proximity, and that inherently unlocks a wide variety of benefits for its residents, including comfort, affordability and a greater sense of social belonging. Co-Living isn’t just a housing model — it’s an effective solution for a growing demographic.

The Medium(a leading journalistic online platform)

Crisis-resistant rental and transaction markets

23%

institutional transactions in the residential sector

Residential real estate investments in the DACH region remain crisis-resistant during the COVID pandemic. At EUR 16.6 billion in the first nine months, institutional residential transaction volumes in Germany were 23% higher in 2020 than in the same period last year (data source: BNP). Rental and transaction prices are still on a long-term upward trend.

Considering the likely continued strong demand in the residential sector and sustainable returns, real estate investors must ask themselves the following questions:

1

Which concepts will offer medium to long-term potential?

2

How did living concepts hold its ground during the COVID-19 crisis?

3

What innovative offers can I use to set myself apart from the competition?

The need for community and high-quality living space is increasing

70%

of Millenials and Generation Z feel lonely

The Co-Living concept is experiencing high demand, especially from “Millenials” and the “Gen Z Digital Natives”. What they have in common is their preference for rent vs. ownership and preference for high-quality urban living space despite affordability challenges. Through “sharing”, this generation can afford high-quality housing, despite rising housing costs in the city centers. A more efficient use of living space will also better meet today’s sustainability requirements. Even in the wake of the Corona crisis, many leading Co-Living providers continued to record high occupancy rates, as providers such as Treehouse, Quarters show. Two effects can be observed:

On the one hand, there is a need for community: The Cigna 2018 Survey showed that 70% of Millenials and Generation Z feel lonely. The Covid-19 crisis may have intensified this. While restaurants and bars were partially closed, Co-Living brought online or offline socializing opportunities on a smaller scale. On the other hand, some have realized that quality housing is more beneficial and have moved from smaller apartments or shared apartments to Co-Living, which provide additional services.

Low supply and rising demand

65.000

new units in the next 2 years

Similar to student living 10 years ago, the Co-Living trend is still in an early phase. Most providers are start-ups that need to grow to institutional providers. Accordingly, the offer is still limited and the market data is not reliable yet. However, the dynamics are extremely high and it is expected that the offering will increase to 50,000 in the USA and 18,000 in the UK over the next two years. Germany is now following the trend of the two countries. We think that an increase of about 5,000 units over the next two years alone is realistic.

If we take the share of co-working in the office sector as a comparison, we see high growth potential in Co-Living stock versus traditional housing. A volume 10 times higher than today could be absorbed over the next decade. At the same time, we expect demographic trends such as urbanization and migration to continue to put upward pressure on property prices and rents. As a result, the affordability and comfort of housing should continue to gain in importance. Hence, we expect Co-Living to find increased acceptance among both investors and tenants.

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