Before Covid-19, the co-living sector was hailed as one of the future growth markets in real estate driven by the belief that millennials have grown up in a sharing society and, confronted with increasing house prices in most European markets, would be living together for longer.
Since the pandemic, we have seen that co-living operators who had focused on short-term lets were particularly hit, due to lockdowns and travel restrictions.
However, the co-living sector is far from dead. In fact, it is likely to make a swift recovery as the fundamentals of inadequate existing stock, high living costs and a shift in living arrangements, are unlikely to change long term.
Nevertheless there are a few key considerations for the sector to continue its anticipated further growth:
Adaptation
Operators need to adapt to the ‘new normal’, at least until a vaccine has been fully rolled out. That means targeting more local people as the users of their product rather than tourists or those on secondment and giving the tenants greater flexibility on their length of stay.
Affordability
The investors and operators expected to thrive are those whose product is considered affordable, particularly as unemployment figures and job insecurity in Europe are on the rise.
Design
The design of a building and its living space needs to work for its users and the community with regard to social distancing rules and regulations. Not only new buildings but also current buildings may need to be redesigned accordingly.
With planning regulations differing from country to country in Europe as well as within those countries, operators who have been able to demonstrate that their concept works at a certain space design or dimension will be able to make a good case as to why they should be able to roll the concept out in a different municipality.
Services
Landlords and operators who offer professional services, promoting wellbeing and a sense of community (within current government guidelines on social distancing) are at an advantage over those who don’t or can’t. Users will expect a building they are paying a service charge or extra for to be professionally managed and more efficient than a building run by a buy-to-let landlord, for example.
While a number of players in the market are refining their offering, the search is still on for the ‘holy grail’ of a high-quality but affordable product. Those who find it are likely to reap the rewards and beat the competition, benefitting the whole co-living sector in the long run.
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