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In many areas of the country, older buildings and neighborhoods are falling to ruin. What if you could invest in these areas and not only rejuvenate the neighborhood, but increase available housing at the same time?
As a real estate developer, you can, by creating co-living buildings. Over the past few years, companies like WeWork have changed the way we imagine office spaces. Many small businesses are beginning to resemble tech companies with communal areas and weekly activities. By trading in traditional cubicles for fully furnished and inviting open spaces, employees have the necessary equipment and comfort to conduct efficient business at a fraction of the cost.
Co-living is the residential equal of coworking. Co-living relies on a shared economy where people have individual bedrooms but share kitchen and communal living spaces. As residential real estate prices in most major cities escalated, various startups have been applying this model to housing to create more affordable and fun places to live while helping employees avoid long commutes and high rent. Being a real estate developer myself, I too recognized the opportunity in shared spaces and helped create a co-living development company that manages and creates affordable housing in the most exciting neighborhoods in L.A. and San Francisco. What I’ve learned in the process is that co-living is a boon for the real estate industry, creating an advantage for developers and residents alike in cities like these.
Boost Your Portfolio And Improve Your Community
Co-living companies convert low-density housing units to high-density ones by remodeling to make more efficient use of space, creating a market where people value location, services and community over apartment space and privacy. Co-living is an opportunity for developers who can redesign these buildings quickly and inexpensively.
Remodel Existing Spaces
Remodeling low-density buildings for high-density occupancy is a temporary way of adding housing space without changing the number of units. A good analogy would be to consider low-occupancy housing as a pie. Remodeling cuts the pie into more pieces. Renovating low-occupancy housing serves more people, especially in cities with high construction costs.
Most real estate investors and developers can add co-living as an option for their housing toolbox. With a little imagination, investors could utilize their existing buildings, in higher-populated areas as co-living spaces. However, they could also consider co-living as an investment opportunity with future real estate purchases.
As co-living continues to see more investment, this popular trend is likely to keep gaining traction. Shipping issues, labor shortages and proposed tariffs have all caused a ripple effect on the cost of real estate development. Developers are thinking of more creative ways to turn a profit.
However, when it comes to increasing housing, it might be in a city’s best interest to incentivize developers to build new units in addition to remodeling old ones, allowing cities to continue to grow and evolve with minimal cost.
Utilize A Team To Redesign Quickly And Inexpensively
By learning the most cost-effective ways to renovate and rely on other professionals to offer their opinions, you can easily invest in this space. You may already have buildings in your portfolio that lack full-time tenancy or have high turnover. Redesigning the space to offer short-term, long-term and communal living can boost rental income and occupancy without having to expand or buy a new building.
Location, Services And Community
Some co-living companies have found that increasing density and providing a wide range of services, development and profits may be workable in cities like New York and London. Recently, a significant number of co-living spaces have opened in new buildings designed for that purpose. It’s not clear what its legacy will be, and there is some debate.
For some, the co-living experience feels like a fun fad more than a long-term business. Some critics believe that co-living companies are capitalizing on current housing shortages by providing smaller units at high market prices. Of course, this also offers more comfortable short-term rentals for people who relocate for temporary employment or family needs.
The Sustainability Of Creating Co-Living Spaces
The viability of co-living spaces is only hindered by what can be achieved through real estate developer creativity. Reimagining the use of an apartment building, existing structures connected to a property such as a garage or adding on to a building can have you on your way to offering co-living options.
Too, co-living may offer long-term leases and desired amenities for a growing urban singles community. Between 2005 and 2015 the rate of people living with roommates or housemates grew 39%. The increase is in part due to people staying single longer than in previous generations. In particular, millennials are more likely to have a roommate and no significant other, choosing to live a more independent lifestyle for more time than previous generations. These younger, single adults are willing to settle for a “shoebox-sized” room with less privacy to live in their desired location with a built-in friend group.
Also, because a higher number of jobs allow employees to work remotely, co-living spaces have begun showing up all over the world in destination cities, exotic locales and remote locations — all with the same goals of providing better services, lower prices and great renting experiences. As a co-living developer, I think it’s all about the experience. Properly designed co-living spaced will attract the singles and families who are looking for better services and community in their neighborhoods.
While many people believe that co-living is a temporary solution to high housing costs, many people choose to live in a co-living situation for reasons other than price. Either way, branded as lifestyle, community and amenity-driven living, co-living is very much a part of the future of real estate development.