ULI and JLL highlight ESG potential of European co-living boom

Co-living, an emerging subsector of the residential ‘living’ asset class, has the potential to unlock opportunities for investors underpinned by economic and demographic drivers, according to a new report from the Urban Land Institute (ULI) and JLL.

The sector has witnessed rapid growth in Europe recently, with ULI and JLL estimating total investment totalling about €1.2bn from 2020 to mid-2022 and further capital commitments backing the expansion of operational platforms.

The two organisations have produced a best-practice guide to support this growth, including recommendations for policy frameworks for developers, design and development of co-living schemes, operations and technology, and financial metrics to improve transparency. 

Recommendations from the report include:

• The industry needs to demonstrate the benefits of co-living – such as, efficiencies, social impact, resident satisfaction, community engagement – and communicate them to policymakers and the public. 

• Planning guidance should preserve the sector’s flexibility but increase certainty on preferred locations, room sizes, levels of amenity space, operational benchmarks and affordable housing contributions.

• Operators should engage with neighbourhoods by allowing public access to communal areas, such as co-working space, providing discounts at local businesses and bringing local businesses into the buildings.

• Pathways are needed to reduce the carbon footprint in the sector to meet sustainability targets.

The report argues that co-living can help cities struggling to provide appropriate, affordable housing for rapidly growing urban populations, increasingly made up of small and single households. Existing housing stock tends to not be tailored to small and single households that are often new to a city, and co-living could play a role in addressing this.

The report also highlights potential ESG gains that can be derived from the sharing of amenities and public spaces and converting disused buildings and spaces, including increased affordability, energy efficiency, social engagement and wellbeing.

ULI and JLL suggest that, on an all-cost basis, including rent, bills and subscriptions, co-living is often competitive with other forms of living.

Of the 175 real estate professionals in Europe surveyed in the report, almost half (49%) said the strongest driver for growth of the sector was a lack of affordability, and half cited the the size of the younger population. This was followed by concerns of the number of single-person households, a desire for flexibility and urbanisation.

The report acknowledges that early co-living projects, which often lacked shared spaces and amenities, had led to negative perceptions, possibly holding back the sector’s relationship with policymakers and planners.

It also recognises that the sector has traditionally been seen as a solution for a limited demographic group of graduates, but the research shows that co-living can appeal to different demographic groups, including international business travellers and active seniors who want to return to cities to access culture and dining experiences.

“We see significant potential for the co-living sector in Europe providing a solution that fits the demands from many diverse target groups, all interested in city living and access to shared spaces and amenities,” said ULI Europe CEO Lisette van Doorn.

“So far, most of the focus has been on young graduates, but the potential customer base is much larger and diverse than that.

“At the same time, there is an ambitious ESG agenda linked to successful co-living projects, by focusing on repurposing of existing buildings and knitting the project neatly into the wider community, by connecting residents to local entrepreneurs or giving the wider community access to some of the amenities, like co-working and a gym. We have barely begun to scratch the surface in realising its true potential.”

Van Doorn added: “For any project to be successful, it is important to have all stakeholders, including the developer, architect, investor, operator and planner, on board as early as possible, taking a long-term perspective, and work closely together in implementing ESG practices and targets, adapting assets to a range of income levels, and using evidence to communicate the benefits of the sector more widely.”

Tom Colthorpe, associate in the EMEA living research and strategy team at JLL, said: ”The drivers for growth in co-living are setting out a huge opportunity for the sector to create and demonstrate social value, thus unlocking more investment and changing policymakers and public perceptions about the benefits of co-living.

“Our research draws on data and surveys to understand the European co-living landscape, existing stock and pipeline, demographics and investment levels, to propose key recommendations for the sector’s evolution.”

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