Co-living – A popular formula for Millennials
The Residential sector is evolving, tourist apartments have lost prominence, and traditional renting might result problematic as a result of higher default risks, late payments and rent controls. In the midst of a spiral of changes within the residential sector, Co-living is expected to step forward and unleash its full potential. As proven by recent figures, Co-living is in an incipient phase of development characterised by great growth opportunities.
To this day, Spain hosts a total of c. 1,200 professionally managed co-living units, which represents a share of 5.18% of the total number of units in Europe. London ranks first with 16%, followed by Amsterdam (12%) and Manchester (10%), out of the total 23,150 units. In Spain, there are various projects in the pipeline, pushing capacity upwards to 5,000 expected units by the end of 2022.
International investors such as Greystar, Blackstone, DoveVivo or Attico have included these types of assets in their portfolios recently; taking advantage of the use of land as intended for tertiary use. Other players like Homiii and the Excem REIT are also taking part of the movement. According to statistics, the average occupancy rate in Spain for Co-living spaces is of 95% and users usually stay for c.11 months.
Co-living spaces have a fairly segmented target group: middle aged adults (normally around 33 years of age) living abroad and employed. Co-living spaces present a great alternative for them by combining privacy with a sense of community which allows them to network with new groups of people with similarly-aligned interests. Furthermore, access to a wide range of services is guaranteed (ie. kitchen, laundry, cleaning, common rooms) which heightens quality of life.
Apart from the major cities (Madrid and Barcelona), there is unrealised potential for co-living spaces in cities such as Valencia, Alicante, Malaga, Seville or San Sebastian. Rental fees do not differ much from traditional rental, and can even be 15% more expensive when integrating all the services offered to the user. In Madrid there are currently several projects under development, both in the city centre and in areas such as Alcobendas, Rivas Vaciamadrid and Valdebebas, with opening scheduled for 2022 and 2023.
Although the boom is evident, the sector still faces the regulatory complexity for the legal development that properly qualifies the use of land by public administrations, as well as possible impacts with VAT tax treatment. The challenge facing the sector now is to find the best way to combine the flexibility of a new product on the market with the necessary legal structure for the implementation of projects of this type.