Co-living developments are a type of purpose-built rental housing, under the same principle as Build To Rent (BTR) but offering smaller size apartments.
These apartments are usually around 20-30 sqm, with access to communal amenities.
Key to the concept is community living. Typically, young professionals will move in with like-minded people, sharing services and benefiting from flexible rental terms. It is still a nascent sector but one which has been steadily growing since the pandemic. This growth has been largely in response to demand for more housing in better locations and the issue of first-time buyers being unable to afford their first home.
The investment case
It is still early days, but on the back of the success of BTR and purpose-built student accommodation, appetite for co-living from investors and lenders is growing. It has proven to be a popular model in Germany and we now have some successful case studies in the UK. These include Folk’s Sunday Mills scheme in Earlsfield, and Dandi’s scheme at Wembley Park, both of which have achieved strong lease up rates and rental growth.
In addition, the higher density of the co-living model, usually leading to higher achievable rent per sq ft metrics, makes it a better financial proposition for developers trying to make appraisals stack, as well as for lenders looking to lend on assets that show healthy levels of profitability and which are capable of bearing higher finance costs.
Audience and marketing
Co-living schemes are very attractive to graduates and young professionals – Dandi’s flagship co-living scheme in Wembley was fully let within 91 days of coming to market, while Sunday Mills in Earlsfield opened to residents at the end of October 2023 with 50% of the units leased before opening. According to a recent Savills report, 82% of Dandi Wembley residents said the scheme improved their quality of life.
Targeted marketing by operators sells an appealing lifestyle of a vibrant urban community with access to social events and a range of amenities. Plus, the benefit of shorter than average tenancy agreements, around 3 – 9 months, gives time for those on work placement schemes or probation in a new role to make longer-term decisions.
Regional vs city development
London is leading the way, but mirroring the growth of BTR, schemes are coming in smaller towns such as Reading and Guildford, as well as the UK’s major regional hubs, such as Manchester, Sheffield, Glasgow, and Birmingham.
Co-living certainly has the potential to be a success in all towns with strong employment opportunities, particularly university towns in which those formerly residing in purpose-built student accommodation (PBSA) schemes wish to continue living in vibrant, communally minded developments. We may, in fact, see regional co-living developments be the main driver for future growth in the sector.
Regulation
However, to date, planning has been an issue for co-living schemes. Certain London boroughs have deployed a blanket ‘no go’ policy. Currently, co-living does not have its own use class and therefore falls under ‘sui generis' in the UK, meaning there is no rule book to follow.
In 2021, the Mayor of London introduced the London Plan – a set of policies for growth in the capital looking at, amongst others, housing and infrastructure. Looking at ‘new ways of living’, the plan introduced Policy H16 pertaining to co-living schemes. Notably, each council must follow the Plan, though is allowed to add additional requirements. Developers are finding themselves needing to take open-minded boroughs on their development journey, in the hope of educating them that co-living provides appropriate, quality accommodation. That said, as the sector gains momentum, there will be a precedent set for others to follow.
Alongside our own, overall lending appetite for co-living has definitely increased in recent years as the sector continues to mature. Co-living is a unique opportunity to redefine city living in a way that is not only profitable but meets the needs of today’s society.
* Elliot Blatt is Head of Origination at ASK Partners *
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It probably works in London but elsewhere is questionable.
One that opened near me in September was still 70% unlet in February according to a local newspaper.
A comment on a review site said "Prison cell sized rooms at well over a grand a month and minimum salary requirement of £41k or requirement of rich guarantors". Having looked at the floorplans they were exaggerating a bit about the prison cell size but none of the rooms include any form of comfortable seating and most didn't appear to have enough space for even a compact armchair without having to constantly move it around the room. They have got a few very small studios at around £900 a month for key workers earning below £37K.
One of my HMO tenants who currently pays £545 a month went to view it and came back incredulous that they were charging over £1300 a month for something that wasn't that special. It's got a gym (without a treadmill) and a cinema room but how many people would pay more than £200 a month for a gym membership and a few trips to the cinema? Bearing in mind there are 2 proper cinemas and a recently built state of the art leisure centre with swimming pool within a few minutes walk of this co-living development it seems a bit unnecessary to have wasted space on mini versions.
I theoretically like the concept of co-living developments but the price point and communal facilities have to make sense. Also the mix of people. Unless the sound proofing is top quality (which apparently it isn't) imagine having shift workers coming and going at all hours, mixed with people staggering in at 3am from a nightclub.
Hi Jo
I did a post on breaking news yesterday that received a lot of likes. Everyone was saying how the NRLA was letting the rest of us down and that we needed to form our own landlord association with you at the helm.
Sounds like a cross between an HMO and student housing!
Hi Margaret
Very flattering, especially the amount of likes yesterday.
The biggest problem we have is the industry is completely fragmented. Somewhere close to 3 million private sector landlords in the UK and only 100,000 belong to the biggest landlord association. There are numerous other landlord associations scattered around the country doing whatever they do. Some of them have some pretty good ideas but they're not recognised by Local Authorities outside their immediate area. There are also a few individual landlords who are now regularly quoted in the press. I especially like the stuff Mick Roberts in Nottingham says. But it's taken more than a decade of him being pretty vocal before the national newspapers discovered him.
I guess the majority of landlords with only one or two properties don't want to pay the membership fee or can't justify the expense or don't regard it as relevant for people like them. With such a small percentage of landlords belonging to any kind of organisation we're not going to be heard. Especially as the NRLA seems to have become very middle class. It's all awfully nice and polite and wishy washy. Maybe we would all feel more represented if the NRLA used the same techniques as Shelter and Generation Rent?
Yes I expect you are right Jo. I just feel NRLA are just such a let down. I don’t feel they are very representative. I started with nothing and have worked hard like the majority of us. I get cross when people say aren’t you lucky owning those properties-no I have just worked hard. When I acquired my first property I had a full time job and spent evenings and weekends refurbishing a small three storey property into three attractive flats.
Just caught up with this, not interested in the article but more in Margaret's post. I've left the NRLA such is my frustration with them. I would wholeheartedly agree that Jo would make an excellent voice for hard working decent Landlord's. I hear what you say Jo but we all have to start somewhere, it all depends if you have the desire and time to become a focus point for decent Landlords.
Currently I am using my spare time to get involved with Reform, I would urge other Landlord's to seek out Reform near them if they really want to make a difference. Giving up some time now can make the difference that Reform needs, plus nothing is for free and for those of us that can should really consider making a donation. Now is the time to push as whomever gets in next will be there for another 5 years.
Sounds horrible and expensive
Oh how depressing 😩 they say “ an appealing lifestyle of a vibrant urban community with access to social events and a range of amenities. “, it looks like secure accommodation 👮🏻♀️👮🏻♀️👎🏻. I pity the young and the world they are going to have to navigate 🤷♂️. We really did have the very best of it 🎉🏝
Nothing new about this we had this in the 1960’s shared kitchen & Bathrooms communal living, they were sharing more than their facilities endless fights, people like their own private space.
Yes wasn't nice was it Michael
The RLA destroyed us by taking over NLA suppose to be stronger together following the amalgamation of the 2 but it wasn’t that, it was virtually all RLA taking top positions.
50k members each still not much difference they are not concentrating on increasing membership but several spin off money streams.
Membership £100.00 is nothing fiddle sticks, the regulations they invented is costing us thousands per property.
Some Landlords have had an easy ride and still have, never put their heads above the parapet, not commenting on here or licensed either but they are making real money most of their properties are £1’000.00 pm more than my similar licensed properties a simple check of the licensed registered you can see straight away who they are and we know they are let out in their thousands.
Just seen a 1930’s Semi today same as one I have let, licensed, 2 parking spaces for £1600. pm, theirs £2’850.00 pm no license no parking.
Another one £1500. pm so I thought that’s reasonable but wait a minute it’s a one bedroom Flatlet occupying less than half the House.
So if rent cap comes would I be locked in at the current low rent and they would be guaranteed their existing high rent ?.
What Mr Gove is doing with the RRB & removing S.21 is driving Landlords out or under ground making rents this high, they can’t save any money to buy their own forcing them to keep renting indefinitely.
Nice one Mr Gove if there was a prize for dick heads you’d win hands down.
Tenant’s friend really if only they knew the truth……..
Mergers rarely work. The MSM keep suggesting REFORM merge with the rump tories, but they are not that stupid. If you want an example think back to the SDP and Liberals. SHUDDER!
I definitely preferred the NLA. The accreditation scheme was vastly superior. The landlord library was an excellent resource. The NRLA just seems to offer a very poor experience compared with what we previously had. It's more about dreaming up ways of charging landlords for stuff that used to be included than actively campaigning on our behalf.
Mr Richard Lambert was a brilliant CEO of NLA a shame he had to resign on the take over to make way for Mr Ben Beadle.
You should take over the leadership of the NRLA Michael. You would do a fantastic job. Can you stand for that position? Is it possible?
You have such a wonderful experience of the pre-Section 21 days, and therefore know what folly the new legislative proposals are.
Hi Ellie. Of Course I’d love to but don’t have academic skills and its all computerisation and admin as apposed to doing real things in a real World .
My Generation the idea was to work hard to achieve wealth , happiness & success.
Game changer now we are disillusioned from being ripped off by lazy, greedy, dishonest opportunists at every level,
thanks for the recommendations but at this juncture and @ 77 as the man said why do I bother Best wishes 😊👍.
I don't think a lack of formal academic training or age would matter one bit, Michael. In fact, both are advantages. You have so much fantastic practical experience instead which is vital, and President Biden is significantly older than you are. You would have a secretary, too.
Also, you bring out the key points on every issue and that is an important academic skill. You do that naturally because you are very intelligent.
We need strong, honest and experienced leadership and you could provide that.
This is our problem Ellie this country is awash with people claiming to be academics who mostly are as thick as a plank
Yes - the problem is that people are considering the private rental sector from a theoretical perspective and have little knowledge of the reality of the situation. Or perhaps they simply don't care about either tenants or landlords because of vested interests?
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