Social distancing has
thrown the whole concept of co-living into question.
had been looking so good for the nascent sector as pioneers such as The
Collective went from strength to strength and started expanding
the Covid-19 pandemic, which forced people living in what are by design
tight-knit communities to stay 6ft apart.
how does a sector based on the concept of close-proximity living deal with
social distancing? Will the lockdown stop the embryonic sector in its tracks or
will the underlying trends that led to its emergence in the first place
immediate challenges posed by the lockdown are sizeable and range from having
to deal with rent shortfalls from residents who have lost their jobs or fallen
on hard times to safely moving in new residents. This month is when the full impact
is expected to be felt for the first time as people’s April paychecks are hit.
of operators have set up hardship funds and hardship panels to deal with that,”
says David Butler, chief executive of the UK Apartment Association, a BTR trade
association that covers co-living.
he admits, it is not easy to sign up new residents at the moment and the
process of moving them in is “a bit patchy”.
learning new ways of doing virtual tours and virtual letting and even giving
virtual instructions for people when they move in,” he says. ”That is an
operators say they are working hard to keep existing residents happy. While
communal areas have had to be closed for the most part, operators such as The
Collective are holding building-wide digital events at its London developments
to help residents engage with each other.
difficult time to be bringing people together, which is what co-living is
about,” says Harry de Lotbiniere, land director at The Collective’s development
partner Hurlington Properties.
is still much less lonely in a co-living building than it would be in a studio
flat on your own. If you have the health and safety and social distancing
right, then at least you have other people there.”
investor perspective, demand is pretty resilient. It is the operators that rely
on short-term leases that face real problems, says Richard Lustigman, director
of living capital markets, co-living, at JLL.
consumer confidence and reduced mobility will impact demand during this period
of uncertainty, and we could see increased downside risk from co-living
operators that have targeted flexible, short-term leases, which present
immediate risks to income,” he says.
ahead, delays to the construction supply chain will inevitably slow co-living’s
growth, especially as new developments become liable for council tax and the
number of lettings slows down. But Lustigman is confident the sector will pull
like the broader living sectors, has defensive investment characteristics,
benefiting from stable cashflows and the ability to actively manage rents
in order to maintain occupancy and limit void potential,” he argues,
adding that the concept will adapt to the new post-lockdown reality.
suspect as we emerge from the current climate, co-living, when it is designed
purposefully, will be a model for mixed-use buildings of the future, where one
can live, work and maintain a fulfilling lifestyle under one roof,” he says.
Lotbiniere remains upbeat about the sector’s long-term prospects. “In the grand
scheme of things, this will be a short-term problem,” he argues. “We believe in
the long-term fundamentals of the business model and we are still very
confident about it.”
sector just has to overcome those short-term challenges first.