The co-living market is rapidly expanding. Of the available investment-grade co-living supply in the US, 55.1% was delivered in 2018 alone, according to research from JLL. By 2021, the co-living supply is expected to increase another 84%. Millennials are driving the demand for alternative living options, as well as young professionals that take short-term assignments in new markets. Capital markets has responding, $300 million into the co-living space year-to-date.
“Co-living allows for a community-centric life style that is highly appealing to a younger demographic,” Dana Brody, SVP at JLL, tells GlobeSt.com. “A co-living situation can be much more convenient than renting a conventional apartment with a 1 year minimum lease as they are much easier to rent and move-into, as well as move out as needed. Additionally, some co-living operators offer activities such as yoga, hiking, food and music events to their tenants creating a community feel as well as added benefits, more similar to a hotel experience than a traditional apartment building.”
Co-living caters to a specific demographic. These projects are most popular in major metropolitans where there are young professionals that have embraces shared economy living styles. “Co-living developments are popping up in several major cities across the country, including Los Angeles, San Francisco and New York where there is a sizeable millennial population much more comfortable with the concept of the shared economy,” says Brody. “They are also much more comfortable with sharing living space and communal living that generations previous, which is in part driven by a need to find ways to bring living costs down in cities where rents are high and starting salaries are not affording them many other options.”
While still new, the product is already evolving to meet demand needs. Co-living communities are becoming larger. The product built in 2018 was double in size compared to earlier projects. The majority of the current co-living pipeline—46.2%—is larger projects. “Co-living options are typically clustered near easy access to public transportation and are situated in dense retail and entertainment locations, offering its occupants the opportunity to go carless, representing another way to save money,” says Brody.”
Affordability is the major benefit of co-living, and the reason why the market is growing so rapidly—particularly in these major markets that are facing extreme rent increases. Co-living offers lower rent for higher quality, and that is an attractive option. “Co-living is simply a much more affordable option in these cities where rents now account for a large percentage of people’s income,” adds Brody. “Co-living also offers a turn-key solutions with all necessities in place, which also represents a huge savings because you are not spending money to furnish a whole apartment and then stuck with the prospect of moving, storing or selling the furnishings when it’s time to relocate.”