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The global trend in co-living spaces

A new global metropolitan housing trend is hitting Australia with full force and is set to cause sustained growth in an emerging property sector dominated by young professionals.

Recent research from Savills shows that co-living – purpose-built housing that mixes high-quality rental rooms with sophisticated communal lifestyle spaces – is on the up.

They note investment into co-living predominately emerging into key cities such as San Francisco (Common), New York (WeLive), London (The Collective), Hong Kong (Weave), Tokyo (Hmlet) and Singapore (Lyf), as residential hubs attempt to solve housing shortages and affordability constraints.

According to Conal Newland, Director of Student Accommodation at Savills Australia, the emergence of the sector at scale in Australia will originate across Sydney and Melbourne.

Savills analysis shows that 88 of the Top 100 ranked regions for investment and development are located across these two global gateway cities.

“As development costs and relative housing unaffordability continues its upward trend in Australia’s capital cities, co-living options will only mature and succeed,” Mr Newland said.

“This is a fresh opportunity for property investors, but it’s also a secure one. co-living is a viable need, and it’s going to become more and more of a necessity over time.”

Divergence from the ‘Property Ladder’
The trend is signalling an important break away from Australia’s rigid obsession with the ‘Property Ladder’, and is also being caused in part by a maturing student accommodation sector.

“A recent shift to the housing journey, from the tradition of living at home until you had enough of a deposit to purchase a dwelling, first occurred with the addition of modern, high-quality purpose built student accommodation (PBSA) to the housing mix,” Director of Student Accommodation at Savills Australia, Paul Savitz, said.

“A new rung, and the next step up from PBSA, is being recognised globally as co-living, or purpose-built graduate, young professional, urban, city dweller, community inspired, experience orientated accommodation. The definition is opaque.”

Mr Savitz stated that co-living brings together high-quality rental rooms on short to long-term leases generally under the boarding house regulations, in the same way that purpose-built student accommodation does, but for a different, and slightly older 25-34 year old target market.

Savills analysis found that 1.46 million 25-34 year olds rent across Australia, with almost 10,000 renters aged 25-34 living in the Melbourne SA2.

Nationally over 250,000 25-34 year olds live on their own and 18.7 per cent of 25-34 year olds also earn above the national average income, making them ideal prospective tenants for high quality co-living properties.

Early evidence suggests that the appearance of co-living properties in dense urban centres has been dominated by young professional residents from either start-up, creative, financial or professional sectors.

“For this demographic in particular, co-living offers the use and delivery of plentiful community-orientated amenity spaces encouraging social interactions, wellbeing and experience, alongside privacy in your living space and beautiful, sophisticated building designs, setting itself apart from the new generation boarding house concept,” Mr Savitz said.

Sydney’s co-living hotspots
According to the Savills Co-Living Spotlight Report the top co-living hotspots in Sydney are the SA2 regions of Waterloo-Beaconsfield, Parramatta- Rosehill, Potts Point-Woolloomooloo, Redfern-Chippendale, Sydney- Haymarket-The Rocks, Newtown-Camperdown-Darlington, Pyrmont- Ultimo, Surry Hills, Bondi Beach-North Bondi, and Erskineville-Alexandria.

Leading the way is UKO and Hmlet, both examples of professional co-living accommodation options available in Sydney. Both have been reporting full occupancy, highlighting demand for their product.

“What’s interesting is that there is no one size fits all approach in creating spaces for young renters and driving occupancies, as experienced in the student accommodation sector,” Mr Newland said.

“Co-living operators have different approaches to the sector and the type of business models they promote. Some groups are looking to be leaseholders and operating within another owner’s real estate, with others fully developing and owning the real estate and operations. This provides a level of flexibility for investors.”

Melbourne’s co-living hotspots
The top co-Living hotspots in Melbourne are the Melbourne CBD, Richmond, Southbank, South Yarra- East, St Kilda, Prahran-Windsor, Brunswick, North Melbourne, Hawthorn, and Carlton.

Asked about the future of co-living, Mr Savitz said that government policy would be pivotal in attracting ongoing investment to deliver sustainable long-term returns.

“Australian lawmakers should be mindful of passing legislation that may reduce the attractiveness of investments into new housing typologies which are more suited to generations with different preferences,” he said.

“Otherwise, our global gateway cities may run the risk of losing their attractiveness to millennials and Gen Zs looking to study, live and work here.”

Design & operation
Co-living and student accommodation share the same basic principles, but each is tailored to their residents’ requirements.

Upper floors
The highest rents are usually achieved on the upper floors, especially those units that offer good views.

Communal space on these levels can add value for residents, including roof top terraces, outdoor cinema screens, barbecues, pools and kitchens. Such spaces are especially important in co-living or student buildings where private spaces are smaller.

Ground
This is the building’s shop front. This space matters and is particularly important for attracting prospective residents who are heavily influenced by the amenities on offer when making a decision to rent (even if they don’t end up using them).

Lounge areas, workspaces, gyms (of sufficient size) and leisure spaces are all common features. Flexible spaces that can be used for organised events or activities are important too. A cafe or bar may also be open to non-residents, improving viability and diversifying income streams.

Basement
Car and bicycle parking features here, including the placement of share schemes, fewer spaces are required in comparison to a build to sell scheme, together with resident storage and associated building plant and servicing facilities.

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