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Co-Living’s Success is Market-Agnostic

National  + Weekender  | 

Leading indicators point to continued demand from co-living’s young, target demographic despite the ongoing public health and economic crisis, Cushman & Wakefield says in a new report on the sector, Coliving During Covid-19. The continuing demand further piques investors’ interest as co-living—a multifamily model where residents share the common areas of units such as living rooms and kitchens while retaining their private personal spaces—continues growing and scaling.

Between March and August, co-living rents and occupancy declined in line with declines in conventional Class A urban assets – 9.4% for coliving rents and 11.7% for Class A studio rents in gateway markets. However, co-living assets continued to maintain a 23.2% rent per square foot premium over Class A studio rents in comparable markets through the third quarter.

Over the past two months, Cushman & Wakefield says, leasing metrics for co-living assets rebounded and exceeded pre-COVID rates due to continued depth of demand relative to supply. Rent collections for co-living properties have exceeded performance of both multifamily generally and Class A comparable product in comparable markets.

“The sustained strength of co-living through the current pandemic can be attributed to what our customers have been saying for years: a home needs to provide a sense of community and add value to everyday life,” said Noah Gottlieb, CEO of The X Company. “If owners can continue to deliver on that promise, co-living will continue to be successful agnostic of market conditions.”

By the end of Q2 2020, there were nearly 8,000 institutionally operated co-living beds across a dozen markets with over 54,000 beds in various stages of evaluation and development, the report says.

The existing inventory of assets has been concentrated in the top urban submarkets of New York, Los Angeles, the X Company’s hometown of Chicago, the San Francisco Bay Area, Washington, DC, Southern Florida, Boston and Seattle. Cushman& Wakefield notes that many of these major markets have high competition for sites and regulatory hurdles affecting all multifamily development.

These challenges are driving co-living developers to widen the search for new opportunities, including lighter-regulatory markets primarily in the Sunbelt, says Cushman & Wakefield. Markets that fall under this secondary wave of co-living development include Atlanta, Denver, Austin, Houston, Tampa, Salt Lake City, Raleigh-Durham and Phoenix.

“While co-living is likely to remain a relatively small percentage of the overall rental market, considerable opportunity for growth remains,” said Susan Tjarksen, Cushman & Wakefield managing director. “As with coworking, we are likely to see some versions of coliving becoming integrated into conventional concepts. All of which is to say that the road is open for coliving to continue growing into an established part of the multifamily market ecosystem and one that has a place in diversified portfolios.”

Pictured: An X Company co-living development in Chicago.

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About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).

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