Coliving and Covid-19
We all know how Coronavirus is drastically changing our life and social model, particularly not the virus per se but the measures applied to fight, or at least contain, it: social distancing and isolation. The lockdown of more or less all the world obliges us to permain for longer in the same place and we can't travel. So no tourism, no schools, no possibility to get a job abroad or whatever. It's obviously a small sacrifice for everyone compared to the health challenges that this situation is creating.
But we would like to analyse the impact on the coliving operators and how they are reacting to this, with a brief view also on real estate and wider implications.
Coliving spaces where people have to live together in smaller spaces are basically double squeezed: not only is challenging to be calm and isolated in this situation but the risk to be infected is higher, particularly in some building with large number of rooms (like Collective or Ollie). To the difficulty to manage this internal situation there’s the collapse in the number of new guests, hurting particularly operator with shorter term period and more inclined to the hospitality sector (Zoku or Room2 for example).
In terms of economics someone could stay afloat for longer thanks to longer time contracts and if they had yet reached a good level of occupancy in the meantime.
It will be very hard for early started projects and for community in more exotic places. However the first reaction is to adapt to the current situation and apply safety rules like the ones you can see in the video below.
We have looked at how current coliving operators are reacting in autonomy while I suppose that someone will be obliged to respect new laws under this outbreak, differently due to geography and country where they're based. The more common reaction are:
· New protocols in terms of safety and cleaning (rules, increased cleaning,..)
· No events
· Flexible cancellation policies
· Increases customer service support and dedicated FAQ
· Virtual meeting and events
· Mental and Physical Wellbeing
Many refuse to close completely and I think that’s on their right to do it, also because we can’t forget that THIS is the home for many people living in the world. Below a link to Outsite news well explaining this.
Many others instead are way more silent on the subject, not publicly reacting and maybe hoping to skip the lockdown, particularly in UK and US. Honestly i think that they're waiting for health autorithies' regulation et similar...
Only today we're seeing some timid post like this below:
We think that someone will be hardly punished in this crisis and will be out of business, particularly recently started operator with less financial support.
The same positive sides of coliving business model will be evicted in this context (no event and hard to create a community being separated) while long term lease prices will be unsustainable and only with some renegotiation could be readapted or managed. The lasting impact for real estate will be probably lower prices and maybe lower rent rates (i will tell surely..).
A lot of expansion plan will be put on hold and survival tactics will be implemented.The most impacted according our study will be operator with external font of revenues like co-working or F&B, operator strongly dependent on travel (see digital nomads) and more inclined to short-term/tourism.
Are we changing our outlook on coliving? No, but it will need to deal with hard times
and skepticism induced by this exogenous crisis. We all hope that lockdown will expire as soon as possible while we are worried by economic and financial consequences on real estate prices and that will be the sword of Damocles for many business plan.
Obviously now the so empthatized flexibility is working in reverse, permitting to many residents to exit from their contract freely or in short-time period leaving onthe hook the operator with expensive long term rents. We think however that in relative terms coliving concept are in a slightly better shape than coworking but this is an earthquake for the sector. Surely micro-living operator with 12months contracts is the business model in better shape now (like Quarters).
Some property manager or hotel are instead reconverting to host medical personnel or becoming temporary hospital (charity intent but also a risky bet to have some form of revenues).
The reality is that Covid-19 is short sharing economy (in financial jargon:)!