Coliving Space is Catching On in Cities Around the World

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In virtually every major city around the world, one trend stays constant: the cost of living increases every year. At the heart of this is the cost of housing – which in some cities like New York or Los Angeles will almost invariably consume the overwhelming portion of a person’s income. It sounds like a real estate investor’s dream on its face, but the situation presents a conundrum in terms of sustainable growth. In particular, those with a stake in the development of rental property in a major city have to think about how the premium pricing eliminates a large part of the population. For instance, a building in a working class Brooklyn neighborhood with 200 studio apartments priced starting at $2900 a month isn’t going to show investors a decent return if only two-thirds of them are filled. Slashing rents is not economically or financially feasible from a business point of view, so what can be done to offer affordable housing and make money in the process? The answer, as many in big city real estate are finding out, is by developing coliving space.

Coliving space – or shared housing – is a concept which is, historically speaking, pretty standard for a bustling urban environment. The demand in these areas is so high it’s impractical to provide everyone their own individual apartment and still expect to sustain a working class population, let alone a middle class. Since cities depend on the working and middle classes to function, from running subway cars to fighting fires to managing road crews, something has to be done. Rent control laws are often enacted, but are either not enough or too limited in scope. The practical approach is through coliving spaces, which function in almost the same way boarding houses did a century or so ago.

Simply put, renters of shared housing are leasing a room to call their own, which is often fully furnished and serviced for cleaning on a regular basis. Yet rather than have their own bathroom, kitchen, and living room, these spaces are shared with other people. Unlike a standard roommate situation, where the arrangement is limited to a relatively low number of people – usually less than six – coliving spaces have the potential to accommodate dozens of residents or more depending on the space being used. The result is a housing opportunity which is hundreds of dollars less for the resident compared to renting a studio in the same area, but which also provides real estate investors with a reliable and respectable return.

Consider these factors in further detail, broken down individually, when trying to understand why coliving spaces are catching on in cities across the world:

Cost – As mentioned earlier, the best cities in the world to live tend to also be the most expensive. A living situation which utilizes the budget-friendly aspects of the roommate model without the unpredictability appeals to renters and property owners alike.

Demand – People from all walks of life are returning to cities in droves. Younger professionals looking to get their foot in the door in competitive industries are especially drawn to big cities. They are a market that only increases in size every year.

Demographics – Fewer people are starting families. Those who do are waiting later in life to do so. In exchange, they focus on building their careers and other priorities. These people don’t need a backyard for the kids or a three-bedroom apartment, they just need a decent place to live with a roof over their head.

Efficiency – Part of the reason so many people are moving back into big cities is because of the growing emphasis on efficiency in lifestyle. This efficiency is also beneficial to property owners and investors, as it reduces their costs.

Investment – While there is no such thing as a recession-proof industry, real estate is the closest to it if managed responsibly. Everyone needs a place to live. Yet with coliving spaces, it’s possible that demand may improve when the economy sours, as more people turn to low-cost ways to get a roof over their heads.

There is only so much space to go around, especially in major cities which have long since developed every nook and cranny into habitable areas yet continue to grow in population. Those invested or otherwise heavily involved in the development and utilization of real estate in urban areas ought to take notice. To ensure a profitable outcome going forward, residential real estate investment must move beyond the standard housing models of standalone homes or even apartments. The opportunities presented by the growing demand for coliving in cities is too good to pass up – and too integral to the future of urban living to ignore.

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