What is co-living in general?
That’s one of our principal subjects to discuss and to develop ideas. The concept is to share and optimize to solve different type of problems.
The opportunities the sharing economy holds for the real estate industry are vast. It’s enabling capital-raising and crowdsourcing, enhancing market analysis with machine learning and advanced analytics, and changing the way we think about leasing buildings and the way buildings are utilized in nonpeak hours. Sharing economy startups represent a new wave of tenants coming into the market and they also are having an influence on building operations.
The same definition of co-living is somewhat debated or, rather, there are different ways to operate the same concept. For example, someone could think that micro-apartments are a way to colive within the same big development but in this case, we miss both a community than common spaces. But if we operate a community service in a hall, or organize events or share the gym and pool, could we define micro-apartments in this way a co-living space?
Our biggest point to define co-living is to use a bedroom (single or double) within the same house with people not related ( also because there are operators that don’t provide closed room but also shared room, crossing the line into a dormitory..). In a co-living space, it’s possible to share the kitchen, living room and bathrooms. We tend to define a co-living space when there’s a shared kitchen, preferably within the same house and the house is fully furnished, mostly with flat rates (bills, wi.fi and amenities, more or less included) and flexible leases.
There are a different approach to define co-living: for example Ollie, one of the biggest names if focused on the features (4 Co’s as they market), so convenience, comfort, community and cost savings. While we agree as a general concept we think that community is not a determinant factor to operate, it’s a value add and retention tool.
Common (another big name) is doing the same, emphasizing private rooms with all-in services included at a fixed price, a standard attractive level of furniture and community building.
Common and Ollie are alternative property managers so we want to take a look at how real estate investment manager define the concept. Corestate is one of the biggest integrated real estate operator, based in Germany, where rent and alternative living solutions have a wide diffusion. They bring co-living under the big umbrella of Micro-living, with other segments as student housing, serviced apartments and business apartments.
While in terms of operation student housing and co-living are very similar, the customer target and its features are the differentiator factor.
In Baleares, there are different dynamics playing, but the emerging and escalating problem is the affordability of the housing markets both in terms of price access than in terms of rental rates. Rent partnership is increasing and has reached dramatic levels: in the whole Palma area on 1700 rental listing, less than 15% were priced under 800 euro/ months. Considering that the average salary of residents is less than 1500 euro, it can give an idea of the social problems involved. The situation is extremized by the different income levels and lifestyle of foreign people relocated or temporarily living here.
We accept that as well as traditional living we have alternative rental options: single-family home rental, extended stay, micro-living and co-living.
Co-living per se is always existed and continues to be operated but until recently it has never been operated in scale by single companies taking advantage of the tech innovations available.
Despite market-to-market differences in application, coliving has gained mainstream prominence in recent years in part due to a surge of millennials adopting coliving as their standard of living. Financial circumstances and housing supply remain the most significant factors impacting millennial renting tendencies. Moreover, millennials tend to engage in lifestyles that align with coliving environments. Shared values, lifestyles and motivations often unite coliving tenants.
Additional newer renting models include micro-units and extended stay leases. However, according to the Urban Land Institute, no formal definition for micro-units exists. Per their study, “a micro-unit is a somewhat ambiguous term that covers anything from a relatively small studio or one-bedroom apartment to a short-term lease, SRO unit with communal kitchen and common room areas.” ULI goes on to suggest that companies are avoiding the term “micro-units” in order to avoid negative connotations associated with the term. In any case, micro-units (relative to the market in which it exists) are an economically efficient alternative to conventional renting in
There are different type of business models operated by a growing number of players. These companies feature all-inclusive amenities, though the degree to which they emphasize the coliving experience varies. Additionally, size affects the number of amenities and features that each company can provide to tenants. For example, most coliving operators offer catered social events and weekend getaways. Firms like Hubhaus and Bungalow use their platform to provide a market for single-family homes to be leased on a per bed basis, building a small scale coliving communities. The remaining investment-grade operators are aiming for ever-larger scale communities with resident totals in the hundreds.
We are a strong believer in the co-living concept because it’s a win-win situation for tenants and landlord. At the same time, we’re conscious that it’s not easy to operate, to reposition and manage. It could be asset-light or not, looking for more density or not. However, the utilization of the residential markets is a necessity and the future for many people now and more and more in the coming future. Our idea of convergence of some type of existing assets towards this business model is our basic idea to develop, without being obliged to build-to-rent ground-up developments.