The demise of The Collective was big news, but just as WeWork’s fall from grace didn’t spell the end of co-working, neither will The Collective’s collapse see the end of co-living.
Having lived at The Collective Old Oak Common, I experienced the benefits of a co-living community, from the all-inclusive approach to service and plentiful amenity space to regular social events to encourage residents to see each other not just as neighbours, but as friends. Demand for such housing is here to stay.
Nor have the fundamentals that have driven the growth of co-living in the UK and globally disappeared. The first of these is the increasing lack of affordable housing in world cities like London. Covid-19 saw a global house price boom, driven by a glut of savings, favourable government policies and a flight to safe assets. Home ownership is even farther out of reach for many.
Affordability issues will not be fixed any time soon. Restrictive planning systems limit supply, and while interest rates are rising, the era of ultra-cheap and easy money that has seen billions invested in residential assets is far from over.
Leading cities such as London continue to draw global talent. Plentiful employment opportunities plus factors such as rich culture, leisure and art scenes mean people will always want to live in these cities. They need somewhere to rent, but the quality of accommodation and service in the traditional private rented sector (PRS) is a mixed bag at best.
Not everyone wants to buy. Changing lifestyles and attitudes to work reduce commitment to buying and settling down. A mortgage can be as much a burden as a bonus.
Renters’ demands have also changed. Buy-to-let flats don’t speak to sustainability, wellbeing, experience and community criteria. But the build-to-rent (BTR) sector offers an attractive alternative to the PRS. BTR investors and operators promise high-quality new-build homes with a range of add-ons, such as amenity spaces and professional management. Yet the rental premiums charged by many BTR landlords make that option unaffordable for many.
That is where co-living comes in. Its more compact homes provide a more affordable rental option while still giving residents access to communal spaces, extra services and social events to help engender a sense of community.
Backed by Oaktree Capital, we’re looking to create an initial best-in-class portfolio of up to £1bn GDV in central London before expanding in other European cities. Our recently approved Wandsworth scheme will provide 213 high-quality spacious studios with internal and external amenity spaces with wellbeing-focused design features such as green walls.
It is not just consumer interest in co-living we expect to grow post-pandemic. Investors are hunting for assets that provide long-term resilient income streams, which co-living, like BTR, does.
The main challenges relate to planning, but as with any sector, businesses go under for all sorts of reasons. Nevertheless, co-living is here to stay – and will become a vital part of the future housing mix in our cities.
Sarah Christie is co-chief executive of Balance Out Living