UK: The coliving sector has seen a surge in both delivery and investor interest, according to a new report from Knight Frank.
The Co-Living Report 2024 reveals a 65 per cent increase in new beds delivered in 2023 compared to the previous year. This brings the total number of operational coliving homes in the UK to 7,540, representing a fivefold increase since 2019.
Knight Frank says that despite this rapid expansion, current delivery accounts for just 0.4 per cent of the potential target market, “highlighting the enormous scale of opportunity for developers, investors, and lenders in the sector”.
Oliver Knight, head of residential development research at Knight Frank, said: “The potential market for coliving comprises 1.7 million individuals currently renting in shared accommodation in urban centres across the UK. The coliving sector’s growth trajectory is impressive, with a fivefold increase in complete homes since 2019. This rapid expansion in supply reflects the sector’s growing maturity and its ability to meet evolving housing needs. As larger schemes come to market and institutional investment increases, co-living is cementing its place as a key component of the UK’s wider rental landscape.”
Investor appetite for coliving has been “robust”, says th report, with nearly £1 billion spent on acquiring or funding coliving developments since 2020. This trend is set to continue, according to Knight Frank’s latest UK Living Sectors Survey, which captured the views of leading institutional investors who currently own more than £75 billion in living sectors assets across the UK; 45 per cent plan to have invested in coliving by 2028, up from 32 per cent of respondents who had already invested.
Oliver Heywood, partner in the Residential Investments team at Knight Frank, added: “The surge in institutional interest in co-living is a clear indicator of the sector’s potential. As more investors recognise the value proposition of co-living, we expect to see continued growth and innovation in this space, particularly in urban centres where housing demand remains high.”
The report reveals that coliving is appealing to a diverse demographic, with 72 per cent of current residents aged between 26 and 40. This demonstrates that the sector is meeting the housing needs of young professionals and not just students or recent graduates. The largest proportion of residents (35 per cent) falls within the 31 to 35 age bracket, further emphasising the sector’s appeal to established professionals.
Knight Frank expects coliving supply to nearly treble to more than 20,000 beds within the next three years, based on the current pipeline of developments.
Ewa Scott, associate in the Residential Investments team at Knight Frank, said: “”From a valuation perspective, we’re seeing increasing confidence in the co-living sector among lenders. This is underpinned by robust fundamentals such as strong occupancy rates, premium rental yields compared to traditional residential assets, and the sector’s resilience during economic fluctuations. The rapid lease-up periods we’ve observed, often averaging four beds per day in some developments, coupled with high tenant satisfaction rates, are providing lenders with the assurance they need to back these projects.”
The report highlights key trends shaping the coliving sector. While London dominates with 74 per cent of complete coliving development, the pipeline is expanding to other markets. Manchester, Liverpool, Sheffield, and Birmingham are leading the way in regional cities, thanks to their large and growing populations of young professionals, strong graduate retention rates, and expanding employment markets.
In London, coliving rents are targeted at a seven per cent discount versus all-in costs of living in other private rented sector accommodation, and a 14 per cent discount relative to multifamily homes.
“The macro drivers for the sector are well-documented and have underpinned sector growth in recent years. They include a clear and deepening supply/demand imbalance in towns and cities across the country, increasing population, urbanisation, decreasing household sizes, and shifting consumer attitudes. Affordability constraints for potential first-time buyers have also increased the demand for good quality rental housing and supported rental growth,” said Knight.
