Co-Living Comes to Canada
As Canadian workers flock to major cities, housing prices and apartment rents are going up. Young professionals who need less private space but are attracted to quality finishes and a lower price tag are the target of a new housing trend sweeping the U.S.
“Co-living” is the latest offering from real estate companies looking to house growing urban populations in a cost-effective way for both tenants and developers.
For the same price as a regular one or two-bedroom apartment, residents can rent fully-furnished high-end units with shared living spaces and swanky amenities. The ability to accommodate more tenants in less space lends financial viability to development proformas as land and development costs continue to rise.
In an age where loneliness is a serious health concern in big cities, co-living buildings advertise a “built-in community,” where like-minded residents can meet and mingle.
While most major co-living companies have yet to enter the Canadian market, recent expansion announcements are a sign that they’re beginning to make their way north. Knowing which markets to watch – and what to watch for – is essential for investors, owners and occupiers looking to make the most of this growing trend.
The Millennial Market
While many co-living companies say that their product is designed for a wide range of users – from seniors living alone to young families – the concept is particularly attractive to tech workers, who value convenience and high-end features.
By the end of next year, co-living darling Node will have launched its first building in Kitchener-Waterloo, hoping to gain traction with the area’s pool of young tech workers.
Once there is proof of concept in Canada, Toronto could be next. Toronto tech companies grew their job pool by a staggering 54.0% from 2013 to 2018, part of an expanding Canadian tech scene that is the ideal landscape for co-living.
It remains to be seen how many of these young professionals will buy into the trend. While in-house cleaning services and regular pub crawls are nice, paying more for less square footage can be a hard pill to swallow.
Those looking for community may also find themselves disappointed. While some co-living companies offer only a few units per building many, like WeWork spinoff WeLive, aim to increase their profit margins with hundred-unit buildings, which could limit friendly interaction between residents.
Investors Are Paying Attention
Demand for affordable housing has propelled purpose-built apartments to the forefront of commercial real estate according to CBRE’s Multifamily Market Overview. Despite strong returns and a favourable forecast, rising rents and falling vacancy are still pushing apartment owners to innovate to stay relevant and capture new business.
Co-living providers also must be willing to navigate unique challenges, including high turnover and non-standard lease terms. While there are risks, investors – who initially shied away from the expense of building new formats for an untested market – are starting to warm to the concept.
As co-living buildings begin to spread across Canadian cities, investors, owners and occupiers should seek advice from a partner they trust. Staying informed is the first step to building advantage and staying ahead in a competitive market.