UK: Investment agency Harris Associates and operator VervLife have joined forces to launch a resident-focused report on the coliving sector.
The partners say this is the first report of its kind that uses real data directly from residents staying in operational coliving buildings across 1,600 studios. It examines the economic and personal motivations driving renters into the coliving sector.
The data in the report has been drawn from VervLife’s UK coliving portfolio comprising more than 1,600 studios.
The research reveals that 47.7 per cent of respondents opt for coliving due to the simplicity of all-inclusive monthly fees. The second most influential factor, with more than 21 per cent of respondents citing it, is the social dimension. “Coliving is not just about convenience but a quest to meet like-minded individuals. This innovative housing model is the future of community-led living with a marked emphasis on state-of-the-art amenities and coworking spaces,” says the report.
The typical coliving resident has an average age of 28 years, and contrary to the stereotype that coliving predominantly targets students, just 28 per cent of respondents fall into this category.
Around 72 per cent of current coliving residents in the UK expressed their intention to stay for 12 months or more. “This indicates a strong demand for long-term co-living arrangements, which, in turn, can translate into more stable and predictable income streams for investors,” says the report.
The partners add that coliving is viewed in the investment arena as either “PBSA” +” or “BTR-light”. Yields in the coliving sector sit somewhere between PBSA and BTR at present but are likely to move closer to BTR, giving investors an opportunity for yield compression. The investment characteristics of coliving are similar to BTR, but because coliving is a more nascent sector investors may be able to benefit from higher yields, the report finds.
“As the institutional funds have raised “Beds” strategies, across the spectrum of Living sectors, many larger funds will need to diversify across different use-classes. While PBSA and BTR may be the predominant recipients of this capital, co-living provides an unparalleled opportunity for new entrants to gain competitive advantage as early adopters. With equity moving away from offices and looking to find new areas for investment, co-living is positioned for a strong investment uptick,” it adds.
The UK has 25,021 operational coliving studios, all of which are fully occupied, with extensive waiting lists, and 21,599 more under development. This represents a nearly tripling of the numbers from 2019.
Jenna Harris, head of coliving at Harris Associates, said: “Coliving isn’t a radical new concept, it represents a reversion to an innate community-centric way of living, reminiscent of the way humans have lived in tribes for millennia. The demand for coliving is fuelled by the housing supply gap, rising single-person households, and the changing lifestyle priorities and preferences of Generation Z and Millennials, and these factors will only increase in prevalence over the coming years. Investors are increasingly recognising co-living as an opportunity area, viewing it as a hybrid of PBSA and BTR. This is an opportune time for investors who missed the early-stage opportunity to invest into the other living sectors.”
Brent Stojanovic, director and co-founder at VervLife, added: “Coliving at scale will add a new dimension to the UK’s housing mix and VervLife fundamentally believes in its benefits for the people that call these vibrant communities’ home, the developers that unlock them and the investors that back them. The footprint of co-living will continue to grow beyond London. Locations with significant student retention rates, good employment opportunities and a vibrant cultural scene are especially appealing for co-living development. Addressing planning policy disparities and knowledge of the specific operational dynamics of co-living assets will be essential to encourage further growth.”
The full report can be downloaded here.
