How can co-living build on today's student accommodation?
For Europe's young professionals, student-style living doesn't end when they leave university. They're providing a ready market for co-living developments.
For many of Europe’s young professionals, student-style living doesn’t end when they leave university.
In previous years they may have run the gauntlet of housing adverts to find short-term flat-shares near a new job. Now, with a new generation of students accustomed to high-spec private rooms, en-suite bathrooms and spacious communal areas equipped with high-speed wifi, their expectations are higher. And they’re providing a ready market for modern co-living developments, according to JLL’s report Co-living – the graduation from Student Housing.
Co-living blocks are building a presence in many European cities; StayToo has accommodation in Germany, Spain and Portugal, Hyprspace in Munich markets its co-living homes as a start-up house, while Quarters in Berlin is a co-living space for artists and creatives in a fast developing city where costs are rising. Facilities vary, but much like student housing, smaller private living spaces are offset by communal areas such as gyms or places to work, which are rarely available in other shared types of accommodation.
“Today’s co-living providers aren’t just offering high-quality serviced accommodation, they’re also providing flexibility and consistency, regardless of location,” says Philip Hillman, Chairman of Alternatives at JLL. “It’s the next natural step for student housing and serves the wider private rental market at a time when young and single people are struggling to find suitable accommodation.”
Yet co-living is very much in its early stages. “The supply in the UK is limited so far,” says Hillman. “We have got schemes like The Collective, Old Oak, with more on the way.” However, there’s no one-size-fits-all model which will work across Europe; habits of different countries need to be taken into consideration. “We’ll see a lot of variations and in some schemes in Germany you have people eating together all the time in social areas. We will be seeing a British version of co-living that is probably slightly more reserved,” he adds.
In many countries, tenancy laws have yet to catch up with these models, but as demand for more flexible housing options grows, change could well be on the cards, Hillman believes.
“It’s part of a living revolution,” he says. “There are lots households being created by families breaking up, divorce and by people just wanting to live independently – not necessarily wanting to share a house together. There’s a massive demand for more individual housing units and those units have got to be smaller and a lot of them are going to have to be in the same building.”
A growing area
Despite growing demand, driven by greater levels of social mobility and urbanization – not to mention a shortage of space in inner city areas – many European cities do not have a pipeline of large-scale purpose built shared living space (PBSL).
However, there is growing awareness from both policymakers and the property market that PBSL has a role to play in modern urban living. “With a further 13 million predicted to be living in European cities by 2025, co-living has the potential to become a sustainable housing option,” says Hillman.
More student housing operators are now looking at the co-living market. The Fizz, from International Campus, has expanded its offering to young professionals alongside students in Germany, the Netherlands and Austria while the Student Hotel, which currently provides short-term accommodation to non-students, is looking to expand its audience with new sites across the region.
“The experience that student housing operators gave developed in managing high density living spaces with frequent levels of occupation is an ideal starting point for moving into the co-living sector” says Hillman.
Plus brand recognition means that student housing operators could potentially build a loyal following among their former student clients with co-living developments in cities popular with graduates.
As the sector gains momentum, investors are starting to take note – although the regulations in different European markets vary.
In countries such as Germany and the Netherlands where student housing is classed as a residential product, it’s easier to open developments up to the wider market as a co-living space, which in turn reduces the risk for investors – young professionals earning regular wages are generally seen as more reliable than their student counterparts.
“Co-living is a very steady form of income,” says Hillman. “What we’re seeing is a recognition that a lot of the younger professionals and entrepreneurs either don’t want to buy an apartment on their own, or feel it’s not quite right for them. Perhaps they’re not going to be in the same place for a while, or they’re just not buying into the whole ownership thing. There’s no doubt there’s a demand out there and the economics of it, I think, are pretty obvious.”
Indeed, investor interest in the UK is being piqued as the build-to-rent model becomes more mainstream and better understood. “Build-to-rent has been slow to take off, but it is starting to happen here,” says Hillman. “Student housing was worth £4 billion in the UK last year and I think it is becoming recognized as an asset class in its own right, with emerging markets in mainland Europe, India and Africa. Investors realize that people are looking for urban lifestyles that have a buzz and which let them socialize and network.”
With greater student populations in Europe, increased urban mobility and the desire for city center living, the market for high-quality purpose built shared living space is growing. The potential is there, says Hillman, now it’s up to investors and operators to embrace more collaborative and flexible forms of real estate.