As someone who has been working in real estate for over three decades, and in the multifamily sector more recently, what have you observed within the coliving sector over the last few years?

The coliving space has certainly evolved over the last five years - from retrofitting houses and small apartment buildings in fringe neighborhoods to accommodate more roommates, to full-fledged purpose built assets in ‘Main Street’ locations that are attracting institutional interest and capital.

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In your understanding, when was the ‘beginning’ of the coliving sector and how has it emerged since then?

Coliving is really just another name for roommates, and roommate living has been around forever. This newest wave of living together with friends and ‘soon to be friends’ that we have called ‘coliving’ started 7-ish years ago, as the cost of urban living skyrocketed during the recovery years after the global financial crisis. The current coliving model is meant to take the friction out of roommate living - who pays the utilities, whose turn to do the dishes and take out the garbage, who was supposed to bring the couch, etc. - AND provide a sense of belonging and community to an age cohort raised on connectivity and technology.

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Cushman & Wakefield has been involved in the creation of a few coliving investment funds over the last year or so, with your involvement in both DTZ Investors and Six Peak Capital. Can you share with us some of their work and other inspiring coliving projects you are involved in these days?

Coliving is a quickly emerging niche asset class that addresses the need for synthetically affordable living accommodations in urban environments. It is perfectly curated for the Gen Z demographic, and as this cohort enters the workplace in full force over the next 5-7 years, coliving/high-density living is going to be in even more demand - especially because of the ease of lifestyle. These are furnished units that include utilities with flexible lease terms. Starting a new job in a new city, changing lifestyles (uncoupling) and uncertain economic times - meaning you are not quite sure about the stability of your job/bonus/raise - all contribute to the demand for coliving.

Six Peak Capital has been a leader in the coliving space with over 18 assets under their belt - either delivered, under construction, waiting for construction permits or in final stages of zoning. They have fully committed to the mantra of dense urban living as a solution to urban affordability for those making 60- 100% of area median income (AMI). They are vertically integrated in that they own their own development and construction companies making the interests aligned in terms of costs, finishes, delivery schedules and high level of construction quality for their purpose- built coliving assets. Using Common as their operator, the Six Peak buildings are the least cost entry into LA neighborhoods - good design with adequate amenities in medium sized buildings (100-200 beds) which helps keep the pricing down. We are in the final stages of securing capital for them for five assets in LA at a total capital stack of $160M. This is Phase I in their plans to continue pursuing coliving opportunities in LA and elsewhere.

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The X Company has a very different spin on coliving than other operators. They concentrate on Secondary cities - Tampa, Denver, Phoenix, Tempe, Houston and Oakland, CA. Their product is the entry level for rent costs, no doubt, but their mission is to deliver a luxury product with unparalleled amenities not seen in these marketplaces. And they deliver big buildings - 300 units with 450 beds and 30,000SF of luxury amenity space. Their mission is to build porous buildings that invite the local community members in to use the WFH space, the pool and their F&B outlets; yoga classes on pool decks, tequila tastings on roof decks overlooking the skyline, private labeled WFH space that is both cutting edge and vast with several private work rooms. They are about to deliver X Denver with another in Denver just starting construction and they have two underway in Phoenix/Tempe, AZ. We are currently in the market for $50M equity for X Tampa, a 28-story, 673,000SF building with 450 units.

Open Door is yet another vision for coliving. Based in San Francisco, they are a vertically integrated coliving developer having both OpCo and PropCo in house. Open Door has 11 coliving assets and is quickly expanding. Their ethos is totally built around a sense of community and belonging. This holistic approach, combined with their proprietary software drives superior results - 97% of their residents are referrals and their average length of stay is 2.7 years. Treating each asset as a “home”, 10% of their FF&E budget is left for the residents to decide how to spend - picnic tables, yoga rooms, solar panels, dog washing stations -all decisions that families would traditionally make together. There is a community grocery shopping list and wellness checks. Their goal is to make urban living both affordable and naturalised around a sense of closeness and ‘know your neighbour’ feel. Their next phase includes five assets along the West Coast totaling over 1850 beds and we are pleased to represent them in this $300M programmatic capital raise.

MAC Development is pioneering the first large-scale coliving asset in the Chicago CBD. It is a 133 unit / 532 beds development with amenity space defined by its location and urban design. This walk to work and WFH building is a combination of true coliving units, 4 bedrooms/4 baths and micro-units. The location is unmatched for using all that the city of Chicago is known for - Grant Park (home to Lollapalooza), the bike path along Lake Michigan, The Riverwalk lined with bars and restaurants, Soldier Field (home to The Chicago Bears and many live concert events) are all within a 10 minute walk from 630 S Wabash. The returns are phenomenal on this development - building to a 225 bp spread over traditional multifamily developments. Managed by Starcity, we are in the marketplace raising equity and debt totaling $80M.

We are about to launch a coliving development portfolio in Dublin, Ireland and are working on one in Australia. Coliving is definitely a global asset class that is gaining momentum daily.

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There is one elephant in the room we can’t ignore these days, the coronavirus pandemic. What have been your observations this past year on how the pandemic has impacted alternative residential asset classes, and in particular the coliving sector?

Contrary to intuition and/or popular belief, coliving has performed admirably during this global pandemic.
It has performed as well or better than Class A apartment buildings, and for good reasons - both for the economic reasons mentioned above, but it also turns out that we are all social creatures and in times of stress we count on and need one another. Community living is one of the bedrocks of coliving and this aspect has made navigating the pandemic easier and mentally healthier than doing it alone. The recent occupancy numbers in coliving spaces reflect this desire for Gen Z and late Millennials to want to live together, not apart, and the rental rates still support this coliving model as the most affordable urban living option (for new construction products).

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In our opinion, coliving is here to stay. Our industry partners, publication contributors, sponsors and others in the coliving ecosystem have remained resilient this year and have proven they are also around for the long-run. For us this feels like a tipping point where the coliving sector and its players are getting serious and institutionalised. What are your thoughts on this? Do you agree?

If not, how can the coliving sector achieve this tipping point and the economies of scale we’ve seen in PBSA and Build to Rent, for example?

Coliving is definitely here to stay, and as we climb out of this pandemic-induced recession, and along with the advent of a widely distributed vaccine, urban living will make a very strong rebound - in fact, we are already seeing Gen Zers returning to urban centers in droves, whether they are still WFH or back to offices. The tipping point is here as institutional capital is poised to return looking at this space with great interest and firepower.

Q1 2021 is going to be a big milestone in institutional capital making major commitments in the coliving space.

In order for coliving companies to take advantage of this tipping point - meaning of capital looking for a home in this niche asset class - they are going to have to demonstrate their ability to scale; both within their operations and development companies, and in finding sites that are suitable for coliving. Institutional capital cannot afford to go mouse hunting with an elephant gun, meaning that this capital source needs to deploy $30-$50M equity checks in order to make the exercise worth their time all while understanding the space and then the ability to actually place the capital within a short amount of time. Coliving developers also need to be well capitalised enough on the General Partners (GP) side to be able to secure land and initiate the zoning/entitlement process, and get these approvals far down the road before most equity will come in.

'The tipping point is here as institutional capital is poised to return looking atthis space with great interest and firepower. Q1 2021 is going to be a big milestonein institutional capital making major commitments in the coliving space'

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‍Finally, will coliving remain a primarily ‘middle market’ product, or will it diversify to serve more demographics / typologies / markets? What’s next for coliving?

Recognising that Gen Z is the first demographic group born with a smart phone in their hand - and that ‘one touch’ is all they are using to order a car, a meal, a date and accommodations - is key in understanding that they are going to demand this ease of operations in their daily living environments.

As technology continues to drive these curated coliving operating systems, I think we will find this lifestyle the most preferred choice in urban environments for those between the ages of 22-32, and in some cases much older. This technology, combined with new construction finishes, thoughtfully laid out unit plans and amenities, WFH space as an integral part of this business model and the purpose-driven community lifestyle - all at the most affordable entry point - positions the coliving asset class for explosive growth over the next decade.

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