Share

January 14, 2020

Coliving is sweeping across Europe’s cities as younger generations increasingly look beyond traditional flat shares or studio apartments.

With cities from Glasgow to Marseille experiencing an influx of 20 and 30-somethings for education or work, demand is rising for high-quality accommodation offering a range of amenities and like-minded communities in central locations. Coupled with the demographic shift towards younger, single-person households, coliving is helping to fill a gap in the market.

“The coliving market is evolving quickly, having emerged from nowhere over the last two or three years,” says James Kingdom, Head of Alternatives Research at JLL. “There is significant growth potential in cities where there is pressure on urban land use and the affordability of housing.”

As its popularity grows, coliving developers are branching out from Europe’s capitals to vibrant regional cities. The Fizz, with nine coliving residences in Germany and The Netherlands, will open a further eight over the next two years in cities including Rotterdam, Hamburg and Frankfurt. Quarters, a U.S. and Europe coliving provider, has announced branches in Krakow and The Hague while the Collective has plans to expand to seven German cities.

In the UK, where just over half of all coliving units are in London, Oppidan recently opened in Manchester, where the Echo Street project is also under development. Meanwhile, plans are afoot for a 24-storey SoCity coliving complex in Leeds.

Cities ready for coliving
Coliving developments in regional cities may vary in terms of interior design and the range of amenities on offer but all have the same basic characteristics, offering less personal space in favour of large shared kitchens and lounges and social spaces like gyms and cafes. Leases can last anywhere from a month to a few years.

Many new coliving developments – such as Echo Storey and The Fizz – are projects from established developers of student housing, with all-inclusive bills and regular community events. Others, like Oppidan and Paris’s Flatmates, are developed by coworking providers, with the added benefit of a coworking membership in the rent.

“We’re seeing new and overseas entrants as well as established developers, many with student housing portfolios, looking to Europe’s secondary cities where there is plenty of growth potential,” says Kingdom.

With less competition for sites than in capital cities, regional cities offer the opportunity for larger developments at lower cost. “With the potential to develop at scale, you might have 250-bed builds but the focus still needs to be on ensuring attractive communal spaces and central, easily accessible locations,” Kingdom notes.

However, with some cities clamping down on short-term stays such as Airbnb lets, one critical obstacle for coliving developers could lie in obtaining planning permission.

“Coliving is an ambiguous use class which matters, especially in European markets, as you have various legal obstacles around minimum size, rents and lease lengths in the rental sector,” says Kingdom.

“The appeal of the sector is that it is blurring the lines between other asset types so you can apply residential, hotel or student housing use depending on local market conditions.”

A new addition to property portfolios
At the same time, this grey area in how coliving can be defined lends flexibility to investor strategies.

“Coliving allows investors to diversify their portfolio, and enhance opportunities and pricing,” says Kingdom. “The range of potential customers increases compared to focusing on one particular sector.”

Since 2015, global investment into coliving developments has increased threefold each year. At present, the UK, Netherlands and France are Europe’s largest coliving markets, but Germany is catching up, according to JLL research.

As developers get to grips with licensing for particular projects, Kingdom predicts coliving will be a much more prominent feature of the urban residential market in the next ten years.

“We’ll increasingly see real estate brands incorporating coliving alongside their multifamily and student housing products,” says Kingdom. “For developers looking to achieve scale in the European Living market, coliving projects will be an integral part of the portfolio and strategically located both in Europe’s capitals and its regional cities offering strong economic growth and a young population.”

Click to find out more about why coliving investment is gathering momentum

Share

James Kingdom

Head of Alternatives Research at JLL

Looking for weekly insights on commercial real estate investment?

Subscribe now