Co-living sector trebles since 2019, Savills finds

The number of co-living beds completed and opened to residents more than doubled last year, a recent report by Savills finds.

Marsh Wall co-living development in London. New research by Savills shows the growth in the sector | BTR News
Marsh Wall co-living development in London

The total size of the UK’s co-living sector, combining both operational beds and pipeline, has nearly trebled since 2019, according to the latest research from property firm Savills. 

This has brought the total number of operational co-living beds in the UK to 3,422, with a further 21,599 in the pipeline. 

“There has been a significant surge in co-living pipeline activity since the onset of the Covid-19 pandemic in early 2020, with residents drawn to this type of tenure due to its emphasis on community and resident interaction at a time when we weren’t able to venture far from our homes. In the five years to March 2020, applications were submitted nationally for 10,950 co-living beds. Yet in the three years since then, plans for a further 12,150 beds have been submitted, demonstrating the appetite from developers, investors and lenders for the sector.” 

Paul Wellman, Associate Director of Research, Savills

Because of this, over a third (38%) of European investors with over €1tn+ of combined assets under management are already investing in co-living.

“Increasingly numbers of investors are recognising the opportunity that co-living has to offer. Particularly, active players in the market show evidence of strong lease-up rates and growing rental values, indicating very strong demand from residents. Dandi, a recently completed co-living scheme in Wembley leased all its 360 beds in just three months, an average of four beds per day, while Folk’s Sunday Mills in Earlsfield let 315 beds in only four months. Co-living has attractive ESG credentials, too, delivering social mobility and real social value, with their emphasis on shared amenities and resident interaction, with schemes fostering a sense of community. Research by Conscious Co-living has also found that carbon emissions per household in co-living communities were up to a third lower than the average UK household, meaning that the sector is well aligned with the values of today’s ESG-driven investors.” 

James Hanmer, Head of UK PBSA Investment & Co-living, Savills

The demand for co-living is apparent across the UK, however many sites are located in London.

Currently, there are 2,820 operational co-living beds in the city, accounting for 82% of the total UK market.

However, regional cities are starting to catch up and are expected to be the main driver of growth in the short-to-medium term. 

“Regional expansion is primarily being driven by investment into Manchester, Sheffield, Glasgow, Birmingham, Bristol and Leeds. These are markets that have already seen high levels of investment into Built to Rent and are home to large numbers of young professionals looking for both amenities and community. However, we are also seeing schemes come forward in smaller markets such as Reading, Brighton, Guildford and Kingston, highlighting that co-living isn’t solely the preserve of major cities. Recent evidence from successful schemes has shown that co-living particularly benefited young professionals facing affordability pressure, providing them with a more flexible housing option, meaning that co-living can be viable in any market with strong employment opportunities.”

James Hanmer, Head of UK PBSA Investment & Co-living, Savills

6,879 beds outside of London are either under construction or have planning consent, and a further 4,797 are either at the application or pre-application stage, vs 6,176 beds with planning consent or in construction and 3,747 in application stages in London. 

“Whilst a few years ago lender appetite for co-living was far more selective than for traditional Build to Rent, this is no longer the case and we are seeing strong demand from both bank and non-bank lenders to finance development and investment opportunities, especially for high-quality sponsors. Lenders have quickly understood that the growth of the sector is underpinned by a more permanent shift in resident demand for flexible tenancies, amenities and social spaces, and they are keener than ever to provide finance to the sector.”

Morgan Scale, Associate Director, Savills Debt Advisory

Looking ahead, 51% of European investors plan to move into the co-living market in the next three years.

A third of those investors targeting the sector said they expect to deploy between €100m and €500m by 2025.

This equates to a total of €2.6bn of capital being invested into the co-living sector across the UK and Europe over the next three years, the research by Savills concludes.