Multifamily Innovation Watch: The Rise of Co-living

Co-living housing was reborn four years ago and has captured the attention of the entire multifamily industry ever since. Market demand and product are both rapidly growing.

Modern Co-living

While co-living housing has existed as long as people have, modern co-living properties are much like student housing for young professionals.

The purpose-built or renovated multifamily assets are designed around several unrelated individuals sharing an apartment unit, sometimes referred to as a “pod.” The residents (usually four to eight to a unit) typically have private bedrooms and share common spaces in the unit (kitchen, dining, living, bathrooms).

The properties also have common area amenities enjoyed by all residents of the community. Co-living communities can be standalone or a section within a larger conventional multifamily property.

CBRE Research found that the U.S. had more than 5,000 beds in roughly 150 modern co-living communities at the end of 2019. While the total is still small, it represents phenomenal growth. Four years ago, there were only a handful of co-living properties in the country. Industry interest in co-living is vast despite the small size of the product inventory.

High Demand + Investor Appetite

Sub-3% vacancy rates — plus long waiting lists and applications far outpacing available units — have confirmed outsized demand for co-living housing. While it’s hard to calculate the depth of near-term demand at this point, operators, their capital partners and the multifamily industry predict that demand will soar.

Co-living companies plan to open more than 55,000 beds in the next few years and have raised hundreds of millions of dollars of equity to meet their expansion targets. Institutional investors have taken notice and interest by traditional real estate buyers is rising rapidly.

The emergence of co-living communities over the last few years has largely been a response to rising housing costs and need for more affordable housing options — especially in major U.S. markets which are attracting young professionals from other parts of the country.

Co-living offers a less expensive alternative for young adults (co-living is typically targeted at 25 to 35-year-olds, but certainly not limited to this age range). Co-living is also appealing for its upscale amenities and finishes (without the commensurate “upscale” rents), plus the leasing and move-in flexibility.

Download the full report by CBRE here.