Pricey housing markets mean co-living buildings are on the rise

Article tiré du magazine The Economist.

Co-living is for hipsters not hippies.

Monday is “Game of Thrones” night at The Collective’s Old Oak building. Millennials congregate in TV rooms around the 11-storey, 550-person block. Some gather at the cinema, lounging on bean bags decorated with old graphics from Life magazine. Nothing gets residents out of their rooms like the hit TV show. This is not a student dorm, however. It is home.

The Collective is a pioneer of a new property format known as “co-living”. Instead of self-contained flats, residents live in tiny rooms with 12 square metres of floor space. Most contain just a bed and a bathroom. During a two-night stay your correspondent could barely fit his shoulders into the shower cubicle.

It is outside these rooms that the building makes its pitch. It comes with a gym, spa, libraries, a good restaurant and a cinema. Residents get access to all of these amenities, as well as their room, for a rental payment of £800-£1,000 ($1,033-$1,292) a month. That includes all bills and high-speed Wi-Fi; they pay extra for meals in the restaurant. Residents have come up with their own services, too. The Collective houses a “library of things”, or a shared repository of useful objects—hammers, tape measures and even tents.

Rising rents have opened up a gap in the market. The ratio of average rents to incomes in London rose from a quarter to a third between 2004 and 2014. In New York, average rents have grown from 29% of average income in 2002 to 34% in 2014. Most young professionals moving to thriving cities face a difficult choice between spending a big share of their income on renting their own place, or moving in with strangers in a shared house to save money. The Collective offers something different.

Old Oak, the firm’s first building in north-west London, has been 97% occupied for most of this year. The Collective is putting up two more co-living buildings in London, one in Stratford and one in Canary Wharf. The notion of tiny rooms and shared luxury services is fairly new and little tested, but the property industry is paying attention. Jack Sibley of TH Real Estate, a property investment manager, calls it “one of the most promising ideas for the future of living to emerge for some time”.

The next step for Reza Merchant, The Collective’s founder, is expansion abroad. He is close to striking deals on buildings in Boston and New York, and is talking to developers in Berlin, where historically low rents have been rising fast for the city’s young, creative types. The Collective has no real competitors in Britain but its move to America will see it run into Ollie, a co-living firm in New York.

Both of Ollie’s existing co-living buildings are smaller than Old Oak (the largest of its kind in the world). But the American firm will soon run a co-living space over 13 floors of a building in Long Island City in the borough of Queens. It is being developed by Quadrum Global, a property investment company, whose financial models predict that co-living will substantially outperform conventional rented flats in future because the return per square foot is so high.

WeWork, a private firm that is the world’s largest provider of shared workspaces and is valued at an estimated $20bn, has a residential arm, WeLive, that is running co-living units out of a leased building on Wall Street in Manhattan. It has joined forces with a property firm in Seattle called Martin Selig to construct a new 36-storey building, 23 floors of which will be dedicated to co-living.

The model will get tweaked as developers see what works and what doesn’t. Mr Merchant is using data gathered from Old Oak to refine The Collective’s new buildings. Rooms will be slightly larger, because the tiny square footage is one of the main reasons residents give for moving on. Sensors monitor use of the common spaces, and in the new complexes the kitchens will all be on one floor, rather than scattered around the building. Most of Old Oak’s shared spaces are in fact fairly empty; the liveliest area is the launderette, where residents mingle and watch TV as they wait for washing cycles.

Maria Carvalho, a social-sciences academic at the London School of Economics, moved into the building because she wanted to live with other people, but did not want to have to find roommates. “I would call it a hipster commune, not a hippy commune,” she says. She particularly likes meeting friends walking home from the train station but says kitchen utensils often go missing. (With too many co-livers to be able to know everyone personally, CCTV is used in these areas as a guarantor of good conduct and cleanliness.)

The Collective and other companies like it have a choice to make, says Roger Southam of Savills, a property firm. They could continue focusing on incoming workers to big cities, providing minimal private living space alongside attractive shared areas. But Mr Southam sees much more potential if co-living spaces can give residents slightly more private space, allowing them to attract people already living in cities. Starting from the smallest of rooms and working up may let co-living firms hit upon the perfect balance of shared and private space. Who, after all, doesn’t want a cinema in the basement?

 

From the print edition