Dubbed by the Irish Times as “student dorms for grownups”, co-living spaces are becoming an increasingly popular feature of the Irish property landscape.
The concept of co-living, while not necessarily new, has undergone some significant rebranding. In an attempt to appeal to a younger generation of consumers, developers have modeled the scheme on the hugely popular industry of co-working spaces. These trendy and sleek offices are famous for attracting scores of ‘digital nomads’ who are products of a fast-evolving market. It seems only natural that the next frontier for the co-working millennial is co-habitation.
Setting the trend
The new living scheme is making headlines in some major publications. With CNBC heralding co-living as “the next big thing”, and Forbes magazine advising that “real estate investors should pay attention to trends in micro-living, co-living”, a growing number of younger people are turning to this type of accommodation. A Gallup poll showed that “24 percent of people surveyed in the United States spent more than 80 percent of their time working remotely in 2012. That grew to 31 percent by 2016.”
The statistics indicate a significant desire for a sense of belonging in an increasingly pricey living environment. The market response? A budding sector of developments that foster community and collective creativity for the growing number of remote working urban dwellers. Chairman of the Irish private equity firm, Lotus Investment Group, David Grin is ready to act, saying that, “as the world changes, property development must change alongside it, or preferably preempt that change and plan to deliver it.”
A nation of renters
The concept of co-living is rather new to Ireland. Developers are still in the process of fully grasping the needs of the Irish market. That’s according to the latest property market report from commercial real estate advisors CBRE.
Still, CBRE predicts a noticeable spike in developments that aim to accommodate the new living scheme. The expansion of co-living accommodations, according to a report in the Irish Independent, is said to be especially concentrated in Dublin. An initiative led by Housing Minister Eoghan Murphy is also encouraging planning authorities to greenlight these types of shared accommodation schemes “in the regeneration of old buildings.”
The CBRE report details another interesting shift that has taken place: an increase in long-term renting of apartments as opposed to buying homes. In fact, a recent headline in the Irish Times read, “Ireland well on the way to becoming a nation of renters”.
Ireland has long prided itself on high levels of home ownership, but the market has seen a decrease in owner-occupied residences in recent years. According to Commercial Property editor, Ronald Quinlan “in 2016 there were 497,111 households renting, up 4.7pc from 2011, bringing the proportion of renters to nearly 30pc of the population.”
Of course, like in most urbanized areas around the world, younger sections of the population are far more likely to rent, due to uncertainty and lack of affordable housing. In an analysis of Ireland’s dwelling behaviors, “65pc of the Dublin population aged 25-39 are renting from a landlord. Only 26pc of people within the same age segment own their home, with the remainder renting from a local authority.”
While there are those who may scoff at the growing trend as simply passing a fad, an increasing amount of “deep-pocketed investors” are being drawn to these kinds of enterprises. Early projects of co-living schemes in the country have since spurred a number of Irish developers to make construction plans containing a co-living design element, a move that has certainly not been overlooked by property investors. Lotus Investment Group stated in one of their company newsletters, “this is likely to become a development vehicle of choice, given the profitable nature of the offering”.
While investors and developers seem to be riding the wave of change, another reason for the increase is less risk. At least that’s what Cairn Homes CEO Michael Stanley has expressed on the future balance between homeownership and long-term rental in Ireland.
Mr. Stanley said, “one of the challenges with a house builder is that you’ve got to take the risk that if you’re building 300 homes, you’ve got to find 300 customers when you’re finished, or you’ve got to find 100 individual customers per year…What makes funders and banks far less nervous is the build-to-rent (BTR) model in which large-scale residential developments, typically apartments, are delivered to the market in one fell swoop rather than in phases, and to one purchaser.”
Fortunately, the CBRE report indicates that the “appetite of both investors and occupiers for Irish real estate remains strong despite the uncertainty surrounding Brexit”.
CBRE executive director and head of research Marie Hunt said: “Occupier demand remains healthy across all sectors of the market and we continue to witness strong investor demand for investment opportunities particularly in the office and build-to-tent sectors.”
Not just for millennials
It is important to point out that irrespective of whether seeking alternative ways to live is a cause or an effect of market changes, the result is the same; this lifestyle choice is growing in its appeal for an increasingly more amount of people.
A recent article in Forbes Magazine completely dispelled the myth that co-living is exclusive to recent graduates who are creeping their way into adulthood. They found that co-living is also becoming popular with a more mature demographic.
According to the article “new co-living propositions have been hitting the market recently, targeting a slightly older demographic that desires a strong sense of community and a curated offering, but also wants significantly more living space than that afforded by micro-living products.” The article goes on to talk about the rise of “co-living 2.0”, a group of people who “value their privacy, care about what they are sharing and whom with”.
A collective effort
One thing is certain, both the government and big investors are in favor of the increase of property change. In fact, property investors are assisting the government in meeting its target of adding 25,000 to 35,000 units to the property supply over the next 10-years. This eventual contribution will play a big part in curbing the current housing crisis, a point that, according to an October 2017 CBRE report, strengthens the case for ‘Build to Rent’ venture (BTR), an ideal development model for the co-living scheme.
The world has changed, and property development must change alongside it, or preferably preempt that change and plan to deliver it.
It is fair to say that this flourishing new sector could definitely catch the eye of some international investment opportunity seekers curious about the exciting new Irish market.