In recent years, we have seen the rise of managed Co-Living schemes across Europe in response to major real estate and social trends. Co-Living is similar to PBSA in terms of its overall building design and operation, but with the key difference that it is open to the whole letting market, and often includes a coworking space.
The lack of affordability to buy property due to stringent deposit and mortgage requirements, rising urban employment and people marrying and having children later are trends which apply in most major cities across Europe. People are renting for longer, but the construction industry has not kept pace with rising demand, and this has created a housing shortage affecting both permanent and transient residents, and students alike. The sharing economy, and the desire for experiences and social engagement rather than owning things, is a further phenomenon. Co-Living is catering to all these trends.
A major new report by CBRE on Co-Living in Europe has found that the line between Co-Living and PBSA is increasingly blurred. At The Class Conference 2018 in Milan, it was identified that the lack of PBSA provision had given rise to Co-Living schemes catering to the large student population. At last year’s conference in Berlin, it emerged that in Germany PBSA and micro-apartments share a zoning use class and are marketed to both students and young professionals. London retains 47% of its graduates and also attracts 25% of other UK graduates, so Co-Living is also an option for mature students and twenty somethings.
Given the marked undersupply of PBSA in most major European student cities, Co-Living schemes, which are aimed at the transient population in general, are an additional accommodation choice for students.
In 2020, COVID-19 has obviously presented challenges to operators. Most report having gained and lost some residents during lockdown. In common with all other public spaces, communal areas have to be operated at reduced capacity or closed completely.
However, self-contained studios are ideal for managing social distancing, reducing the need to share bathroom and kitchen facilities. Residents are able to work or study in a quasi-office environment on site, without needing to use public transport or be in an office. Operators are also catering to the mental wellbeing and social engagement needs of residents with organised online events. The alternative option for many students unable to access managed accommodation would be a shared apartment, with the associated risks of sharing facilities.
As well as the obvious need for returns, today’s investors have an increasing focus on ethical investment, referred to as ‘ESG’ (environmental, social, and governance factors). Co-Living, and indeed PBSA, ticks many ESG boxes. From an environmental perspective, it enables the efficient use or re-use of assets. New builds lend themselves to modular construction, which reduces the amount of construction waste on site. Operators can demonstrate that they promote energy efficiency supported by technology, recycling and efficient water management. Social factors, often not satisfied by other property asset classes, are met by creating diverse mixed communities comprising students and other residents, through public contributions, and by catering to the mental health agenda. The responsible management approach to COVID-19, as outlined above, would demonstrate strong governance.
Co-Living is an emerging asset class meeting genuine needs in the student and transient population in major European cities. In these exceptional times, it is not only a safe accommodation choice for students, but a compelling investment choice.
You can view CBRE’s latest Co-Living report here.