Industry Intel

Navigating the Evolution of UK Housing: Co-Living as a Transformative Solution

The UK's housing market confronts a pressing issue: a dearth of homes amid a burgeoning population. Stakeholders from both the public and private sectors are actively exploring strategies to alleviate the strain arising from the supply-demand imbalance.

Notably, co-living schemes are emerging as a viable solution to address the housing crisis. These schemes present shared, affordable, and well-appointed accommodations tailored predominantly for individuals aged 18 to 40. They encompass fully furnished private living units, communal spaces, and often incorporate flexible working areas.

London has witnessed the establishment of co-living schemes in developments like The Collective in Canary Wharf, Folk in Battersea, and Enclave in Croydon. Moreover, the concept is gaining traction in other cities, with Manchester set to complete 2,500 beds soon, and Watkin Jones & Moda preparing schemes in Leeds. Birmingham, Edinburgh, Glasgow, Sheffield, Newcastle, Cardiff, Nottingham, and Bristol also boast a growing pipeline of co-living projects.

The advantages of co-living spaces are manifold. They provide a sense of community, organising social events and offering well-designed communal spaces. Many also include co-working spaces, aligning with the post-pandemic trend toward hybrid working patterns. Co-living is appealing to renters due to short-term leases, inclusive utility bills, and often pet-friendly policies. Affordability is a pivotal factor, with purpose-built properties offering cost-effective spaces that include utilities and high-quality amenities like concierge services, gyms, and cinemas.

Despite the evident benefits, the co-living sector faces challenges. Approximately 4,000 operational co-living units exist, but the potential demand is estimated at 1,900,000 tenants, with factors like the nascent market, competition for land, and difficulties in securing planning permissions impeding supply chain dynamics. Classification debates around use class further complicate matters, questioning the viability of purpose-built shared living as C1 or Sui Generis use.

Investment opportunities in co-living are gaining momentum, with a projected £2.25 billion investment over the coming years. The demand for rental properties, particularly in major cities, remains robust, fuelled by the increasing number of students. Investor interest in Purpose-Built Student Accommodation (PBSA) has risen by 32% in two years, according to Investec. Key operators, including APG, British Airways, BP Pension Fund, Co-Liv Fund (DTZIM), VITA, Blackrock, and Oaktree, are actively involved in co-living projects like Living Scape, Dandi, Folk, Ark, The Collective, Union, and Outpost.

The current pipeline includes around 6,500 co-living units under construction, featuring noteworthy projects such as The Gorge in Exeter, Downing's £227 million co-living scheme in Manchester, and Vita's two-tower co-living development in Manchester spanning 2024 and 2025. Co-living is evolving as a well-established and valuable sector, drawing increasing attention from both investors and tenants in the UK housing market.

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