Manchester has just approved plans for two developments described as 'co-living' apartments. They are huge. Between them, they will comprise some 1,875 units providing around 3,000 bedspaces. Co-living is a new word that we're going to see a lot more of, so is it a new opportunity or something to be avoided?
What is co-living?
For decades, the UK's cities have become used to the conversion of large houses into flats. Some are fully self contained. Others are divided in such a way that each resident has a private bedroom, perhaps with an en-suite, but shared facilities such as living room and kitchen.
Large scale co-living developments simply take this idea and put the units into a very tall tower. The plans just approved in Manchester include small studio apartments and 'cluster' apartments with 2 to 5 bedrooms sharing common living and kitchen space, a model familiar to the student accommodation sector.
Who are they for?
As many a new graduate will testify, their degree may well be a platform for a long and successful career, but the first rung on the ladder can be tough financially, so low cost accommodation is attractive.
A large number of these first-steppers will have been living as students in shared houses or purpose built halls of residence - co-living space would be a familiar environment before moving on to the much loved 1 bed city centre apartment.
Given the substantial money and serious players involved, the research will have demonstrated substantial demand and solid profitability. But for who?
An investment opportunity?
The model has strong similarities with Purpose Built Student Accommodation (PBSA). Many of these student blocks are owned by institutional investors, in our opinion, rightly so. Others have been built for private investors, with, at best, mixed results - Student accommodation - a good investment?
Given the entrepreneurial nature of the property development community, it is almost inevitable that we will soon see units in co-living blocks being sold to private investors. It is equally inevitable that many will use the same business model that has bedeviled privately sold student pods which have left many investors stuck with vacant properties that they cannot sell.
If co-living is to become a realistic option for individual owners, the industry will need to solve the issues surrounding privately sold PBSA, including unconventional legal ownership structures, the removal of restrictive letting and management practices and the development of a viable resale market.
We can see the market opportunity, but would prefer to see co-living as the preserve of the financial institutions.