The Rise of Co-Living in the US

Introduction

Co-living in the United States has only seen an upward chart in recent times with the country’s lucrative education system attracting students beyond international borders. With a higher surge in demand for student accommodation in the United States with a shortfall of supply in accommodation beds, the sector is also captivating the attention of property management groups and institutional investors across the globe as a remunerative investment opportunity. So, what exactly is co-living and what’s all the buzz around it?

What is Co-Living?

The concept of co-living is pretty simple - creating a housing arrangement wherein tenants, preferably university students live together in shared accommodations. This concept of housing has gained immense popularity over the years and is on a bull run in the United States.

In contrast to traditional university-provided dormitory or off-campus residential properties, co-living is much more inclined towards the affordable palette, loaded with amenities that make student housing much more comfortable saving them from incurring hefty costs on utility bills, household supplies, and much more.

The Growing Trend of Co-living in the US

The trend of co-living is lately being romanticized a lot among natives, primarily due to its transparent concept and flexibility that it provides in terms of the leasing period, and is much more affordable in comparison to traditional renting of purely residential properties. By catering to various tenant groups including students, working professionals, and small families, the trend of residing in co-living spaces has been on the rise.

In contrast to private residential properties which are on the expensive side, co-living apartments are properties that provide tenants with a strong sense of community and social belonging, wherein they can interact with each other in shared common spaces. Lastly, these properties have more flexible staying terms in contrast to other real estate accommodations offering much more rigid leasing policies.

How is Co-living Reshaping the Student Housing Market?

Co-living in the United States is taking the shape of the new normal due to its affordable cost of living, especially in high-cost cities which demand a strong financial commitment, and can act as a severe burden for students.

1. Flexible lease agreements

Co-living properties offer flexible lease agreements in comparison to the traditional housing model, which makes it easy for students to move in and out easily. This is extremely helpful for students who are not sure for how long they will stay in a particular property and are in search of a stay for a temporary living arrangement and what syncs with their specific needs.

2. Affordable Housing

The increasing demand for affordable student housing compels the co-living market to surface above traditional housing models. With the rent being divided among resident individuals, the pockets are not hurt and do not require a hefty expenditure every month.

3. Growth Potential

The co-living market is still in its infant stages in the US but is growing rapidly. The increasing demand for affordable housing options, flexible living arrangements, community living, and the potential of bagging higher returns are all factors that are compelling the market size of co-living to skyrocket and attract lucrative investment opportunities by PMGs. A recent report by CBRE shows that the co-living market in the US is estimated to reach a $100 billion valuation by 2025.

4. Boosts Economy

According to a recent report by JLL, the co-living market will reach $300 billion by 2028. In 2023 alone, the sector is expected to pocket a $10 billion investment by various PMGs. Common, WeLive, and PodShare are some of the co-living PMGs that operate a wide range of properties across the US and have acquired hefty investments from global investment groups.

Growth Opportunities for Co-Living in Student Housing

Co-living has been gaining more acceptance from students across the globe due to its economical living and amenities offered, ultimately creating more demand for such properties. The demand for off-campus apartments and co-living properties is growing for being packed with similar operated-property features that make student housing more comfortable, with amenities such as shared bathrooms, shared kitchens, laundry facilities, household appliances, and much more.

Also, the majority of co-living spaces offer community lounges where tenants can host meet-and-greet sessions, socialize with fellow roommates, and have a sense of community and belonging. All these factors combined are raising the surge in co-living properties, which is compelling private property operators to construct and invest in managed housing for higher yield and profits.

• According to the Institute of International Education (IIE), the US received 914,095 international student applications for the year 2022-23, representing a 3.7% rise from the previous year. This directly impacts the demand for more PBSA properties to be constructed to cope with the shortfall of supply beds.
• Governments and universities have decided to address the issue of shortfall in co-living beds proactively by partnering with PMGs to construct more affordable co-living properties. The government is providing funding for the construction of co-living spaces, and universities are partnering with co-living property operators to make affordable student housing more accessible to international students.
• A report by JLL predicts the co-living market to reach $300 billion by 2028 and pocket investments of around $10 billion from various PMGs in 2023 alone.
• A study by the National Coworking Report threw limelight on the percentage of students living in co-living spaces. 15% of total students in the US reside in co-living shared accommodations, and the number is expected to reach 25% by 2025.
• Another study by the National Coworking Report shows that co-living properties can generate 20% more rental income in contrast to traditional student housing.

An array of factors contributes to the rise of student co-living in the housing sector, which includes the high demand of international students enrolling in US colleges and universities, increased cost of living in major cities, and the growing trend of online learning, wherein students can stay back and study or work remotely. Despite the current scarcity of co-living properties in the US, the market is showing promising growth in the near future, which is also capturing the attention of investors with the co-living sector showing a much-assured potential of bagging up a lucrative ROI.

How is Co-Living a Lucrative Investment Opportunity for Property Operators?

It is evident that the demand for co-living properties is only going to soar high in the emerging years, with the increased cost of housing at prime locations, demand for affordable and flexible accommodation, and a strong emphasis laid upon social and community connections.

• The co-living model has a higher rental yield than most traditional housing models. This is due to the shared amenities that PMGs provide such as a community lounge, and furnished rooftop, with included utility bills, against which they are able to charge higher rents.
• Operating costs are comparatively lower as co-living providers can pool resources and share expenses such as property cleaning, maintenance, etc.
• Typically situated in prime urban locations with close proximity to colleges and universities. These locations are generally posh areas and property value increases over time.
• PMGs are responsible for managing a range of properties, from lease administration to property management and marketing, against which they charge a nominal fee from the total rent collected by tenants.

In addition, the shortfall of co-living beds has opened doors for global investment firms and PMGS to create more co-living spaces and PBSAs in the long run. The limited supply has also created a plethora of opportunities for investment firms to acquire properties in this emerging market. As a whole, co-living acts as a profitable investment opportunity for global investment firms, institutional investors, and PMGs.

Potential for Higher Occupancy Rates & Rental Income for PMGs

One of the most common reasons for co-living climbing the upward chart is the potential that it holds to generate higher rental income in contrast to other traditional housing models. Co-living spaces showcase a lower annual rent of USD 7200-10,800, making it an affordable option for student housing in the US in comparison with other on-campus and off-campus property types.

• PMGs have the requisite expertise and resources to market the properties they are managing to a wider target audience and enhance their online visibility on various social platforms, print media, and more. As more students get drawn towards this affordable housing option, property operators can optimize occupancy rates to foster rental yield.
• PMG by collaborating with marketplaces can assist property owners in setting competitive market rates to attract and retain tenants.
• They also help negotiate flexible lease terms on behalf of property owners to get the best possible deal for their property, leading to high occupancy rates.

Collectively, the provided amenities, furnished apartments, security and privacy, affordability, and sense of community, backed by effective marketing by PMGs on marketplaces like amber and flexible leasing agreements are all maximizing the potential of higher occupancy rates. Thereby, the collective efforts put forward by PMGs and marketplaces are pushing forward the rental income being generated by co-living properties.

Takeaway

As more people are in search of affordable and flexible housing options, the demand for co-living properties is making its way up into the housing sector. Co-living in the US has the potential to successfully assist in meeting the global student housing demand but also change the way people live and outrun traditional housing models that have existed in the United States for decades.

When the question boils down to maximizing your occupancy rates and leveraging the benefits that the co-living market offers to students, amber can help you grow your business in this lucrative market. List with us today and get your property visible to millions of students from across the globe.

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