Co-living is a relatively new rented housing concept that sits somewhere between purpose-built student accommodation (PBSA) and build-to-rent (BTR). Typically seen as student accommodation for young professionals, the model is evolving and, potentially, could meet the housing needs of a wider demographic.
One of the first co-living spaces to open was The Collective Old Oak in 2016. The scheme in Acton, west London consists of a variety of studio and one-bedroom units plus on-site co-working, a gym and sauna, outdoor terrace, and a cultural events programme.
Jim Cooper, associate director in development land team, Cushman & Wakefield, said: "We are seeing increased interest from developers for PBSA and co-living as a way of delivering returns from land versus traditional residential."
Co-living is still in its infancy but there are signs of growth. At present, there are 7,540 operational co-living homes in the UK, according to Knight Frank, with a further 13,483 either under construction or with planning permission.
An increasing volume of institutional capital is targeting the sector, with nearly £1 billion invested in funding or acquiring co-living developments since 2020. This includes £258 million in the first quarter of 2024, with co-living investments accounting for a fifth of the total invested in the UK BTR market.
Notable transactions include a joint venture between Amro Partners and Japanese developer NTT to fund The Rex, a 210-bed scheme in Kingston, south-west London. The £80m project is directly opposite Kingston train station.
Amro CEO Raj Kotecha said: “Our innovative co-living model, with extensive shared facilities including a residents’ lounge, communal kitchens and dining rooms, a wellness centre, co-working spaces and a rooftop terrace, will help meet the needs of renters in Kingston. The housing requirement in the town is already under pressure and this is only going increase with projects such as the Unilever Global HQ opening in early-2025, which is expected to bring 2,000 new jobs to the town centre.”
The Rex is the first collaboration of what is expected to be several joint ventures in the UK residential market.
Notable too is Yardhouse, a 209-unit co-living scheme in Wood Lane, west London. Ethical investment fund Bridges and its development partner HUB secured an £88m forward funding deal with Singapore-based real estate developer City Developments Limited (CDL).
Through a partnership with Women’s Pioneer Housing (WPH), a specialist housing association, the Yardhouse will also deliver 60 new affordable homes for single women, as well as a new head office for WPH.
Simon Ringer, head of property at Bridges, said: “The project is the result of close collaboration with Hammersmith and Fulham Council, the local community and local business owners to bring forward a co-living and affordable housing scheme supported at all levels in the borough. It will replace 36 existing WPH homes and 300 sqm of office space, creating a vibrant and dynamic living environment that aligns with modern lifestyle preferences and better serves the needs of local people.”
Looking at future development, other key players in the co-living space are developer Halcyon and UK pension fund investor DTZi who together have delivered 800 co-living units since 2022, and have a secure pipeline of another 1,400 units.
The appeal of co-living to tenants centres around flexible housing (leases typically run from three to 12 months) and social interaction. The all-inclusive nature of co-living monthly bills (which include costs like council tax, energy bills, wi-fi, gym and co-working membership) is a convenience too.
Strong tenant demand for co-living is reflected in the speed at which schemes can be leased-up. Dandi Wembley leased all its 355 units in just three months, while Folk’s Sunday Mills in Earlsfield, south London, let 315 beds in only four months.
How fast the UK’s co-living sector can expand is down to both investor appetite and local planning departments.
Cooper said: “We're seeing more investor interest but it is selective and measured. There is not much of a track record yet in how to operate these buildings, therefore raising questions about what they are really worth.”
At present, 33 local authorities across the UK have a co-living scheme either complete, under construction or with planning permission.
However, policies and attitudes to co-living vary from one local authority to the next. A significant number of councils do not view co-living favourably because, in many cases so far, the schemes are not delivering affordable housing.
A case in point is the Halcyon and DTZi scheme in Earlsfield, south London, currently advertising monthly rents between £1,735 and £2,265.
Cooper commented: “If the target market is young professionals, key workers and creatives, quite frankly, they’re not going to be able to afford it. If you’re a newly qualified nurse moving to London, you’re not going to be able to afford £1,800 a month.”
In theory, as a model to tackle the UK’s housing shortage, co-living ticks many boxes: high density housing in urban locations, ability to develop on brownfield sites, delivery of social and lifestyle amenities.
Will co-living remain similar to a long-stay boutique hotel product, or will it take different forms? That will largely depend on how local authority planning departments dictate the level of affordability.