So, you want to invest in coliving.
The real estate landscape is witnessing a transformative wave with the surge in popularity of coliving spaces.
As investors seek to capitalise on this emerging trend, understanding the intricacies of investing in coliving is paramount.
In this article, we'll delve into key considerations, from knowing your target market to understanding legal and regulatory aspects that can guide you towards a successful coliving investment venture.
About the contributor—Matt Lesniak is Co-Founder and Head of Impact & Innovation at Conscious Coliving, an award-winning content production, consultancy and research hub helping shared living communities and businesses thrive. Conscious Coliving is behind thought leadership content such as the Coliving Conversations podcast series, The Community Facilitation Handbook and The Conscious Coliving Manifesto. As a researcher, community facilitator and impact strategist, Matt works at the cross sections of the community building, placemaking and shared living sectors.
If you've spent any time in the real estate industry over the past five years, you probably know full well what coliving is. But in case you need a refresher, here’s a definition from shared living consultant and co-founder of Conscious Coliving, Matt Lesniak.
“Coliving is a concept that involves professionally managed shared living spaces, often facilitated by a third-party operator or coliving company. The concept takes a more integrated approach than other concepts like cohousing. A third-party operator handles design, day-to-day operations, maintenance and community facilitation. Some operators also take a more vertically integrated approach and own, develop and operate the assets themselves.”
Coliving combines property and asset management, investment, urban design and communal living to deliver unique offerings that confront some of the key issues facing the real estate and housing market today.
“These challenges include combating loneliness crises and addressing housing affordability issues,” adds Matt. “Coliving offers a solution to a blend of these challenges. For some, it serves as a practical response to the lack of suitable, safe, and high-quality housing.”
So now that we’ve covered the basics, let’s explore some things that you should consider before you invest in coliving.
Before diving into coliving investments, it's crucial to define your target market.
Are you catering to digital nomads, young professionals, or expats? Understanding the needs and preferences of your prospective tenants will help tailor your coliving space to meet expectations.
For digital nomads, amenities like coworking spaces may take precedence, while young professionals may prioritise proximity to business districts or reliable public transport links. It’s also important to consider what your target market values, so you can cater a tenant experience that matches that.
For example, in our tenant survey, we asked coliving tenants living in the UK, Netherlands and France what they valued in a landlord, 39% said prompt response to repairs and maintenance issues is an important trait in a landlord or property manager.
Armed with data like this about what your target market values, you can inform decisions to, for example, invest in maintenance and ticketing software.
Beyond personal needs and desires, also consider the economic benefits of coliving and how this might resonate with your target audience.
“People are drawn to the security aspects, the fresh furnishings, cleanliness, and overall safety that coliving spaces provide,” says Matt. “This is particularly relevant in the face of housing affordability concerns and the often subpar quality of existing housing options, which is a prevalent issue in many cities around the world.”
“Coliving has an indirect role in tackling loneliness. People are increasingly gravitating towards community living and collective living as a way to address their need for social connections and combat the feelings of isolation. It offers a practical and natural solution to the loneliness challenge.”
One of the defining features of successful coliving spaces is a strong sense of community. Investing in shared spaces and organising community events fosters tenant engagement and creates an environment that residents genuinely want to be a part of.
“Higher engagement levels often lead to lower acquisition costs, increased retention, more referrals, and positive word-of-mouth marketing, all of which can translate into cost savings and business success,” says Matt.
“One of the biggest potentials of a mixed-use hybrid coliving model is the concept of a neighbourhood hub. By creating such hubs, you foster interaction between residents, local community groups and businesses.”
“Coliving, when incorporated into mixed-use spaces, can bring together a whole range of different people who can connect in different ways. That gives asset and property managers the opportunity for impact on different levels: the individual level, the community level and the wider society level.”
The significance of location cannot be overstated in real estate, and coliving is no exception. Tailor your property's location to align with the preferences of your target audience.
Take digital nomads as an example: many will seek out desirable locations with easy access to nature, beaches and cultural spots. This explains the prevalence of coliving concepts in places like Costa Rica, Bali or The Canary Islands.
To successfully implement a coliving concept in these locations, amenities like reliable WiFi, coworking spaces and meeting rooms are essential to attract the right target audience.
Now consider a slightly different demographic: young professionals looking for affordable and dynamic living arrangements in large cities. Their needs aren’t that different from digital nomads, but their location means more access to amenities.
If you’re looking to invest in a coliving concept in an urban location, good WiFi and coworking spaces are must have, but other factors like good public transport links or proximity to business districts is also an important factor.
But of course, there is more to life than just work. The location of your coliving concept should also give tenants access to all the leisure, cultural and recreational amenities available in a location.
In our tenant survey, we found that the majority of participants (many of whom lived in coliving spaces) prioritise peace, quiet and privacy when considering a rental property.
This isn’t that surprising. What was a little more unexpected was the fact that proximity to schools and workplaces—traditionally deemed critical factors—took a backseat.
Well-maintained shared spaces took higher priority, suggesting an increase in demand for comfortable and productive remote working environments.
In fact, 72% of respondents said they would be willing to pay additional rent for communal workspaces.
Amenities create an additional layer of convenience to any coliving experience. They tend to make your properties more attractive and contribute to increases in occupancy rate.
“I would start with a shared kitchen,” adds Matt. “That’s usually the core community feature for coliving concepts. People love to cook and be cooked for. It's just a very primal way to gather. And so people really appreciate and value that amenity.”
As we already mentioned, workspaces are also important spaces but some other amenities that can be implemented into Coliving concepts include:
“Connection to plants, nature and fresh air, that kind of thing. it's another very basic human need - and people are coming to value it more and more,” add Matt. “But also consider location, in an urban environment it might be cheaper and more beneficial to partner with local business than to invest in onsite amenities.”
By partnering with local businesses, you can stimulate local economies and collaborate with local businesses, even providing discounts and promotions for coliving residents.
Coliving properties may be subject to specific legal and regulatory requirements, varying based on location.
Before you invest in coliving, thoroughly research and understand the legal landscape to avoid potential pitfalls. Compliance with local regulations ensures a smooth operation and minimises the risk of legal issues down the line.
“A big obstacle to a lot of coliving projects is planning,” adds Matt. “Expect hesitance from planning authorities, since a lot of people still don’t really understand the concept, and its social and economic value.”
“But there is a bit of a misunderstanding of what the true potential and impact of coliving can be. Many cities are dotted with empty buildings, much of which have the potential to be converted into coliving. But the planning around that is just complex”
Before committing to a coliving investment, familiarise yourself with the planning laws and regulations of the area in question. This will help you understand the kind of challenges you’re likely to face later down the line. With proper research, you’ll be able to overcome obstacles much easier if you plan for them in advance.
Investing in coliving spaces presents a promising opportunity for those looking to stay ahead of real estate trends. By understanding your target market, prioritising community building, carefully selecting a strategic location, offering enticing amenities, and ensuring compliance with legal considerations, you can position yourself for success in this dynamic and evolving sector.
As the demand for flexible, community-oriented living continues to rise, a well-planned coliving investment can provide both financial returns and a socially impactful living solution for the modern generation.