Co-living Industry Primes for Growth in 2020

February 17, 2020

Want to know the future of co-living in 2020? The co-living industry is creating a new way for millennials and Gen Z-ers to share space, gain flexible lease terms, and secure the amenities they want. It also is providing significant benefits to landlords in the way of cost savings and stable tenancy. As this market segment continues to expand across the U.S., operators are looking for ways to target markets, secure locations and build additional momentum. Learn Tenant Representation Here!!

Co-living spaces offer tenants, sometimes called members, the chance to pay rent for their bedroom, as well as a portion of the common space shared by two to four other members. This arrangement provides the advantages of lower rental expenses and flexible lease terms.

There are many nuances to operating co-living spaces, including how to identify expansion opportunities and work through lease negotiations. Operators often turn to experienced real estate professionals who can provide guidance on lease structures, real estate site selection, geographic growth opportunities and other considerations.

Understanding Landlord Leases

One interesting co-living growth story to watch is that of Quarters, which has multiple locations throughout the U.S., with one currently in Chicago and more in planning. Over the last eight years the company has grown to become the most established and the world’s largest co-living provider. As Quarters embarks on further expansion, the company turned to Caton Commercial Real Estate Group CEO, Partner and Managing Broker Bill Caton, along with brokers Steve Caton and Andy Velkme for assistance.

The Caton team is overseeing expansion into growing population centers in the central portion of the U.S. While the co-living industry is thriving in large metropolitan areas with large concentrations of Millennials, such as New York, Los Angeles, and Chicago, markets such as Denver, Austin and Salt Lake City are seen as additional growth markets.

One nuance to this market segment is the lease structure. Co-living leases are structured as landlord leases, which are master lease on the entire building or a large section of it. The co-living provider also helps reduce the landlords expenses by taking on a significant portion of the operational aspects of the building, including leasing, marketing, property management and accounting. The leases also have 10 year terms, providing the landlord with long-term stability.

Real Estate Site Selection Factors

As co-living providers evaluate potential development sites, they typically look for trendy neighborhoods with a strong connection to public transportation, a high concentration of Millennials, and access to bars, restaurants and recreational activities. Those neighborhoods are more attractive to the young, urban crowd that typically utilized co-living spaces. As many markets experience population growth, particularly among tech workers, the co-living segment is expected to continue its growth path into 2020 and beyond.

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