Editor George Sell shares five trends he thinks will resonate throughout the living and flex work sectors in 2025.
• SFR looks to bespoke rental homes
The SFR rental market is the investment sweet spot in the living sector at the moment, accounting for around half of all investment in to BTR. It’s easy to see the attraction – with reduced mortgage availability, housebuilders have been keen to sell tranches of discounted inventory to SFR investors, and recent research has shown that SFR commands a 21 per cent premium over the wider PRS market.
But if market conditions improve and interest rates continue to fall, will housebuilders be so keen to sell, and if not what are the implications for the growth of SFR? Options could include a bespoke model, such as Present Made, which is developing its first site at Eddington in Cambridge, funded through a partnership between Nuveen Real Estate and Apache Capital. It will be the UK’s first bespoke rental development, with a mix of apartments and family homes. However, Present Made is shelving plans to continue its vertically integrated approach, and it seems likely that Eddington could end up being a one off.
A more likely scenario will be that housebuilders will increasingly form partnerships divisions, following the example of Vistry, to deliver SFR product at larger schemes for investor partners. Housebuilders could also potentially adopt the Berkeley Homes model – it was the first householder to announce it was forming its own BTR division. What I do think will become the norm, is that the masterplans of major residential and mixed-use schemes will increasingly include a tri-tenure model with a significant BTR component sitting alongside social housing and privater sale units. Whether this trend will be given extra momentum by the government’s imminent planning reforms remains to be seen.
• UK coliving goes nationwide
Coliving in the UK began on a small scale as an upmarket, professionally managed version of HMOs. Over the last 15 years, we have seen the evolution of the large scale institutionally funded model, led by The Collective, which was incorporated in 2010 and went in to administration in 2021. The sector has learned from The Collective’s mistakes to the extent that cities such as London and Manchester have robust development pipelines, with a refined product offer that typically includes self-contained units with cooking facilities and bathrooms, with a high level of amenity provision.
As planning authorities around the country begin to get their heads around what coliving actually is, unit sizes are generally getting bigger, and the model is moving into second and third tier cities which have a significant number of graduates, young professionals and newly single 30- and 40-somethings. Over the last year we have reported on schemes in Cardiff, Bath, Exeter, Leeds, Bristol, Guildford, Woking and West Bromwich, to name but a few. There are still some hurdles to overcome – planners’ attitudes are very much a postcode lottery – but coliving’s march in to the provinces will pick up further momentum in 2025.
• The living sector takes off in the Gulf
While the supply/demand fundamentals for the living sector in the UK are compelling, the socioeconomic factors which are creating this demand are echoed in numerous other regions. In the GCC, where the living sector is very much in its infancy, the numbers are also very compelling – pointing to an acceleration of growth in 2025 and beyond.
In Dubai, for example the housing market is seeing wild and probably unsustainable levels of price rises. Developments are selling off-plan in days rather than weeks and months, and units are often flipped multiple times before they are completed. In the first six months of 2024, average residential rents rose by 21.1 per cent. Around eighty per cent of the population are ex-pats, with a much lower age profile than Western nations. In Saudi, 70 per cent of the population is under 35. All this is an ideal backdrop for coliving, in a form developed specifically for the region – with single-sex floors, Shariah-compliant financing, a tech-heavy offer, and larger units sizes. Livinc CEO Zakee Ahmed projects that the potential coliving market size in Dubai is around 400,000 people, compared with a current supply of 3,500 units (live and pipeline).
The PBSA sector is slightly more established, but still at the start of its growth. Dubai has become an international higher education destination. It has 295,000 enrolled students, with 10 per cent of those international learners. Leading institutions like Middlesex University Dubai, Heriot Watt and University of Birmingham have established campuses in Dubai, attracting global talent. Next door emirate Sharjah has 15 universities.
Saudi Arabia’s Vision 2030 initiatives have significantly impacted higher education, with student enrolment reaching approximately 1.6 million by 2022. The country’s focus on expanding educational access has increased demand for student housing and education infrastructure.
Again, the PBSA product needs to be tweaked for the local audience and culture but the potential for growth is high. Strategic Housing Group’s Myriad brand is the first in the space, and it has significant expansion plans.
• A new wave of amenity-light BTR and PBSA
The ‘amenity arms race’ which has been a recurring theme in UK BTR and PBSA development over the last few years may well be over, as investors increasingly favour an amenity-light model. Cushman & Wakefield’s Q2 2024 Build to Rent investor survey found that amenity-light urban BTR schemes with mid-market rents were investors’ top pick for preferred asset type, with 53 per cent voting it as first choice and 25 per cent voting it as second choice.
The report says an amenity-light BTR product would cater towards a much greater UK renter demand pool. In the UK, 82 per cent of renters earn £39,000 pa or less. In fact, the most populous income band for private renters in the UK is £20,000-£29,000, accounting for 24 per cent of private renters.
A glance to the US, where the multifamily market is more mature than the UK, shows that BTR assets categorised as Class C – with lower rents and fewer amenities, have the best tenant retention rates as well lower development and operational costs. A further benefit of the amenity-light model is the potential to use space which could have been used as communal facilities to include more units in a building, increasing revenues while cutting operating costs.
One amenity which won’t be left out, and in fact will probably feature more prominently in future developments is communal workspace, often based on a coworking model. While people work from home and units often have desks and dedicated work zones, a well-equipped workspace in the building is a key factor in tenant decision making. Having fewer amenities also opens up buildings to a wider demographic – affordability is becoming a major issue for both BTR and PBSA customers.
• Flex becomes the norm for major office landlords
Flex office space is no longer a niche and for some landlords it will become the mainstay of their offer in 2025. A survey of 250 UK office landlords commissioned by workspace provider infinitSpace is predicting significant growth in the space.
The survey found that, as a percentage of their total square footage, on average, 36 per cent of respondents’ office space is currently dedicated to flexible or coworking space. On average, they anticipate this to grow to 54 per cent by 2030.
Around 10 per cent of landlords predict that their portfolio will be almost entirely (91-100 per cent) flexible workspace by 2030, up from three per cent currently. More than half (52 per cent) of landlords believe that their office buildings need to be redesigned or retrofitted to meet changing tenant demands and needs. And nearly two-thirds (59 per cent) of landlords stated that converting office space into flexible workspaces is a key part of their strategy for keeping up with market demands.
This is in line with demand trends from blue chips and SMEs alike. In the US, insurance company Allstate has revealed plans to move a quarter of its 54,000-strong workforce to flex office premises. The company has reduced its office footprint from 12 million to four million square feet, and has partnered with coworking platform LiquidSpace to give employees the flex option. In cities such as Atlanta, Indianapolis, Minneapolis and Columbus, Ohio, Allstate said it has between 100 and 1,000 employees, which it considers insufficient to justify an office lease.
Other blue chips are adopting similar strategies internationally, but in the UK the vast majority of flex customers are made up of SMEs, so the demand is coming from across the board.
A sign of the market’s maturity is the introduction of the International WELL Building Institute’s (IWBI) WELL Coworking Rating. The benchmark is designed specifically for coworking and flexible office spaces, and draws from the health strategies in the WELL Building Standard. It includes more than 50 features including air and water quality, light, thermal comfort, and physical fitness. Coworking spaces that earn the WELL Coworking Rating can display a public-facing seal.
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