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The world is changing fast and to keep up you need local knowledge with global context.
BizNews
The world is changing fast and to keep up you need local knowledge with global context.
*This content is brought to you by Wealth Migrate
The world’s cities are becoming more densely populated and as more people flock to key economic hubs the competitiveness for living space is reaching a tipping point. Cities need to be safe, accessible and affordable to meet the needs of a growing population. While home ownership is a goal, renting a residence is a more appealing option due to the costs involved. Co-living is becoming the solution for a sustainable, safe, and affordable way to live.
The UN-Habitat’s vision is, “a better quality of life for all in an urbanising world”.[1] Where cities and human settlements will not only promote social interactions and have a better ecological impact on the land and provides the right to a standard of living that affords everyone reasonable access to health and safety, from drinking water and sanitation to personal privacy and security. This includes aspects such as the mobility of the population, its access to transport and healthcare, the infrastructure and planning of a city, plus, energy sources, and air quality.
According to our partners, BNTO (Pty) Ltd (formerly Six C Pty Ltd), co-living offers residents private accommodation, shared amenities, and engaging communal spaces creating a cohesive community.[2] More importantly, PBCL lowers tenant expenses compared to alternative accommodation in the same area. This allows co-living to attract diverse renters that may follow a more digital nomad lifestyle, now that working remotely, or a hybrid of working in-office and at-home is more prevalent.
In terms of a traditional rental contract, co-living rentals often include extras such as a fully furnished unit and electricity, water, sanitation, security, and parking.[3] These often are additional costs that a person looking for a shorter-term solution might view as cheaper than taking these costs on individually. While purpose-built co-living (PBCL) assets feature fully furnished studio accommodation, residents are given seamless access to a whole building that uses customised prop-tech resident engagement and property management solutions to provide more than “just a housing solution”.
When it comes to what co-living options are available for tenants, BNTO has a range of residences that are available to rent from three to 24 months. Tenants can rent studio accommodation that includes a kitchen and ensuite, this can vary from 18m2-30m2, and this is just the private space that is on offer.
The communal areas included in a co-living space are:
One of the main perks of co-living is the flexibility and adaptability of the tenant’s living space. In private living quarters, one can have luxurious touches with hotel-quality finishes from an en-suite to a kitchenette and air conditioning. Adding comfort and convenience into the mix gives individuals options for a multi-functional space that can be personalised according to a specific preference.
This has become a global metropolitan housing trend all over the world, with the emergence of co-living being popular with a target market aged 25-35.[5] In just Australia, Savills found that 1.46 million people in the 25-34-year-old age bracket are renting accommodation.[6]
Globally, The House Monk found the co-living rental market accounted for a 75% increase in funding from 2018 to 2019, with countries dominating this industry being China, India, USA, and Europe.[7] These statistics support the United Nation’s projection that communal housing could solve the global housing crisis, as 68% of people will live in cities by 2050.[8] Based on this forecast, co-living could offer sustainable, affordable housing options for many.
This tracks with a worldwide survey One Shared House 2030 that investigates what people of all ages and locations desire from shared-housing or co-living residences. This analysis into communal living is approaching this from a perspective that we already live in 2030 and have 70% of the world’s population in cities and need to house an additional 1.2 billion people by then. Although this is an informal survey created by Anton & Irene and SPACE10 it provides clear insights into whether a communal living situation will be more widespread in the future.
Some of the results point towards this acceptance with answers ranging from:[9]
This follows a rise in co-living accommodation with many companies now operating solely in this market from BNTO to Common, and social communities are growing in national and international markets. COLIV, the world’s first institutional large-scale co-living fund was launched by DTZ Investors and The Collective in 2019. This co-living fund’s aim is to raise total equity commitments of up to £650 million to fund up to 10 co-living assets in London alone.[10]
Part of the draw lies in what’s known as the “subscription economy” — where rentals offer a bundle of services and cover more than just the living area, by including utilities, furniture, and home appliances.[11] Its appeal lies in a community living model where residents share communal spaces and services for a higher quality of life.
Upscale co-living units are move-in ready with some units even stocking smaller items such as towels and cutlery, where residents simply need to bring the bare minimum of living necessities. This is beneficial for landlords as higher rental yields of 8%-10% are common in many countries.[12]
The average rental differs per country as some countries have different perspectives on what spaces should be shared and what should be private. Generally, in China and India shared spaces are more common, even when it comes to room-sharing with family, friends, and or loved ones; while the USA and Europe will prioritise not sharing private spaces and expect more personal space.[13]
According to The House Monk the average rental paid by tenants in 2019 was:[14]
As an investment, co-living is lower risk than other multi-family properties, and investors can benefit from higher returns. Due to the high demand for co-living assets, global investors may look to this emerging asset class to diversify their investment portfolios, especially as real estate is sought-after.
As part of an ongoing educational series, our next article will provide an overview of the multi-family asset class and how it can be used as a tool to diversify investor portfolios.
Find more Wealth Migrate content here:
View our focused webinar on investing in co-living, where our team and deal sponsors analyse the strong demand for this asset class.
Read our investment articles and listen to the podcasts. We cover the topics of diversification, structured notes, and purpose-built-co-living, click here for the full list on Wealth Migrate archives – BizNews.
[1] UN Habitat. (September 2021). ‘UN-Habitat, continuing digital transformation, launches new online, interactive New Urban Agenda course’. Retrieved from UN Habitat.
[2] BNTO Coliving. (December 2021). ‘Co-living, the next unicorn?’. Retrieved from LinkedIn.
[3] BNTO Coliving. (December 2021). ‘Co-living, the next unicorn?’. Retrieved from LinkedIn.
[4] BNTO Coliving. (December 2021). ‘Co-living, the next unicorn?’. Retrieved from LinkedIn.
[5] Rice, J., Entis, G., and Sabat, J. et al. (February 2020). ‘Multifamily innovation watch: the rise of co-living’. Retrieved from CBRE.
[6] Newland, C., and Savitz, P. (February 2020). The global trend in co-living spaces’. Retrieved from Savills.
[7] Kumar, A., and Hatti, C. (December 2019). ‘Global Coliving Report 2019: living, together’. Retrieved from The House Monk.
[8] United Nations Department of Economic and Social Affairs. (May 2018). ‘68% of the world population projected to live in urban areas by 2050, says UN’. Retrieved from United Nations.
[9] Repponen, A., Repponen, I., and SPACE10. (2022). ‘One shared house 2030’. Retrieved from ONE SHARED HOUSE 2030.
[10] COLIV. (October 2019). ‘DTZ Investors and The Collective launch COLIV – world’s first institutional co-living fund’. Retrieved from COLIV.
[11] Rice, J., Entis, G., and Sabat, J. et al. (February 2020). ‘Multifamily innovation watch: the rise of co-living’. Retrieved from CBRE.
[12] Kumar, A., and Hatti, C. (December 2019). ‘Global Coliving Report 2019: living, together’. Retrieved from The House Monk.
[13] Kumar, A., and Hatti, C. (December 2019). ‘Global Coliving Report 2019: living, together’. Retrieved from The House Monk.
[14] Kumar, A., and Hatti, C. (December 2019). ‘Global Coliving Report 2019: living, together’. Retrieved from The House Monk.
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