Group of young people living together looking at a phone and laughing - The Rise of Co-Living

Co-living is not a new concept. As far back as the 19th century it was common for young professionals, newcomers, and those unable to afford houses to rent a room in a boarding house. This option gave tenants the benefit of their own private space, as well as shared social areas and access to services such as laundry and cleaning.

Now in the early 2020s, co-living is back in the UK in a big way. According to Savills, in 2022 there were 2,000 new co-living spaces made available to residents, more than doubling the number of co-living spaces in the UK from the start of the year. This trend doesn’t look like it’s going anywhere either, with a further 4,999 co-living spaces reportedly under construction in 2023.

This marks a significant shift in the rental market, which for decades has been based primarily around renting out self-sufficient spaces to families, couples and individual tenants. Due to major shifts in housing affordability and availability, as well as changes in work expectations and family setups, more and more tenants are turning to shared living arrangements and flexible leasing.

Co-living can provide an alternative, affordable and amenity-rich option for those who would otherwise be priced out of the area where they work, and has the added bonuses of flexible rent options, stronger social networks, and a renewed sense of community.

Read on to discover how co-living is revolutionising the rental market, and how both tenants and landlords can benefit.


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    What is Co-Living?

    Co-living marks a departure from the traditional model of an individual or couple renting a private self-contained space, and posits a new norm in which groups of friends or strangers share living spaces such as kitchens, dining areas and laundry areas.

    If you’re having flashbacks from your student days, you’re not far off – typical co-living tenants are students, recent graduates and young professionals who need to live in urban centres for work but can’t afford the still-increasing rental prices in these areas.

    With larger co-living developments being set up around the country, parallels can also be drawn with retirement communities. Both offer easier, more affordable lifestyles with a strong emphasis on community and social opportunities.

    Co-living also provides a flexible opportunity for those moving to a new city, allowing them to live flexibly in city-centre locations and easily meet new people. Savills reports that at the new co-living complex Dandi Wembley, 59% of residents are new to London, with 35% coming from overseas.

    As co-living becomes a viable alternative for more and more renters, the term is coming to mean more than simply sharing a roof: it could become a community-driven way of life. Offering more opportunity for social connection than traditional renting, it also allows renters to divide costs and chores between them, saving time and money, allowing for more sustainable and eco-friendly choices, and perhaps engendering a sense of community.

    What is Flexible Leasing?

    Co-living tenancies are typically short-term, ranging from 9-12 months, but can last much longer if the tenants find themselves enjoying their alternative way of life. Flexibility is key here, with co-living landlords often offering shorter-term rentals.

    These flexible leasing arrangements offer a way of redressing the disparity between the current market’s tenant demand and the short supply of properties. These arrangements combine different kinds of let that allow tenants greater flexibility with their own arrangements while allowing landlords to maximise occupancy rates and earnings throughout the year.

    Month-to-month rentals allow tenants to move in and out on short notice without having to worry about breaking their lease. This arrangement suits people who require short term rental arrangements, such as recent graduates, newcomers to cities, and those waiting for other housing arrangements to fall into place.

    Landlords considering offering flexible rental arrangements may look into buying properties with a rental guarantee. This arrangement mitigates the risk of being unable to find new tenants, with developers paying a landlord a fixed return for a specified period of time from legal completion, regardless of whether the property is occupied or not.

    For instance, if a co-living tenant needs to leave in the middle of a 12-month agreement, the landlord might have the tenant’s rent paid for until a replacement tenant is found. This measure can allow landlords to more confidently offer flexible co-living spaces without any risk of lost revenue.

    Why is Co-Living Gaining Popularity?

    Continuing Urbanisation

    Unsurprisingly, London is leading the way when it comes to the co-living trend, with 2,820 operational co-living spaces across the city, accounting for 82% of the total UK market. This reflects a greater trend of demand for living space in our capital, despite an increase in working from home post-pandemic.

    This global megatrend doesn’t look ready to stop any time soon: according to UN-Habitat, by 2030 the number of cities with a population of one million or more will be 706, almost double the early 2000s figure of 371.

    As a result, rental stock in London is in short supply, with rent prices going up and up annually in response to overwhelming demand. Students, young professionals and newcomers to London are likely to be attracted to the flexible, affordable and increasingly available option of co-living.

    The Shifting Household

    The typical household of the 1990s is a thing of the past. The average marriage age now falls between 37 and 40, an all-time high, with the 2021 census showing  that nearly 4 in 10 adults have never married nor entered a civil partnership. This is a reflection of both more career-oriented lifestyles for both men and women, as well as the increasing costs of buying a house and starting a family.

    Perhaps as a result of these factors, the number of people living alone in the UK has increased by 8.3% over the last 10 years, while 3.6 million people aged 20 to 34 years are still living at home with their parents.

    With fewer people under the age of 40 entering family households, the demand for family homes is lessening, replaced by an increased demand for career-oriented living spaces, where adults can move away from their parents and have their own spaces without living entirely alone.

    The Affordability Crisis

    According to the Office for National Statistics, private UK rental prices have increased by an unprecedented 5.0% over 2023, as a result of ongoing imbalance between supply and demand across the UK. Rents have been growing faster than average earnings for almost two straight years, causing significant stress for renters – particularly those on lower incomes.

    Meanwhile, with astronomical student loan repayments, an ever-increasing cost of living crisis, unprecedented house prices and mortgage affordability criteria remaining stringent after the economic uncertainty around Brexit and Covid, the prospect of homeownership remains distant or unreachable for many.

    Post-Covid Popularity

    The Covid-19 pandemic had a significant impact on the rental market, leading to an increased popularity in co-living spaces. The periods of national lockdown in 2020 and 2021 highlighted the importance of community and social connection like never before, leaving many sole occupants to seek a new way of living. Co-living spaces offer an opportunity for renters to forge meaningful connections and support networks, lessening the negative mental health effects of isolation during times of crisis.

    Moreover, co-living spaces may include amenities such as shared workspaces, which have become essential during the movement toward remote and hybrid work that followed the Covid-19 lockdown. The affordability and flexibility of co-living arrangements have also been particularly appealing in uncertain times when people are seeking cost-effective and adaptable housing solutions.

    The Benefits of Co-Living for Tenants

    Lower Living Costs

    Co-living is often significantly cheaper than renting individual homes, allowing couples or individuals to pay rent for a single room rather than an entire house or apartment. Furthermore, in a co-living set up, renters share the bills for utilities, internet, cleaning services, and other communal activities and entertainment. This can help communally tackle not just the increasing costs of accommodation, but also the general costs of living.

    Social Connections

    Living in a co-living space can give individual renters who have experienced isolation and loneliness to make meaningful connections, working with others to create working solutions to day-to-day problems. Particularly for those who work from home, co-living can provide a substitute space for the office, allowing housemates to share ideas, make smalltalk, and network with like-minded people.

    Easy Amenities

    In many cases, co-living arrangements come furnished and supplied with all necessities, enabling renters to move in with little other than their personal belongings. Short-term renters or people moving to a new area need not worry about the costs of buying furniture, kitchen utensils and appliances, let alone setting up bills and accounts for utilities. They may also find that their co-living accommodation includes cleaning services and other benefits, making it all the easier to settle in.

    Flexible Lease Terms

    Co-living spaces offer short-term lease options, making them ideal for short-term assignments, internships, or people in transitional stages like recent graduates. Renting this way allows renters greater flexibility and mobility at a time of economic uncertainty.

    The Benefits of Co-Living for Landlords

    High Return on Investment

    The sharing of common spaces allows developers to optimise their property’s footprint while still providing privacy and comfort for their tenants. With private rooms that may be up to 75% smaller than studio apartments, set around a well-designed communal space, developers can ultimately fit more rentable units into the floor plan and profit from a significant increase in revenue per square foot.

    Higher Occupancy Rate

    Flexible leasing arrangements allow for quicker turnovers, meaning that while your tenancies may be shorter, there is also less likelihood of rooms sitting empty for long periods between tenants. In contrast to the traditional rental application process which can place onerous demands on tenants to be financially qualified and commit to lengthy contracts, co-living simplifies the application process and makes it accessible to more potential tenants. This is appealing to young professionals who are on a budget or likely to move for work, and want to avoid committing to a long-term lease.

    Quick Leases

    Specialist co-living properties are likely to lease very quickly, with evidence from large co-living complexes such as Dandi Wembley and Folk’s Sunday Mills in London showing that co-living schemes are rapidly leased up in the current landscape. Dandi Wembley leased all of its 360 beds in just 3 months, while Sunday Mills let 315 beds in only 4 months. This suggests a high demand for co-living spaces that specifically cater to this increasingly popular way of life, meaning landlords are likely to profit fast from their investments.

    Property Management

    Collaborating with Co-living property managers can be advantageous for landlords. The co-living operator fulfils the role of a stable and reliable intermediary that looks after the maintenance of the building, sources suitable tenants, and resolves any management problems on the landlord’s behalf. This allows landlords to profit from flexible tenancy arrangements without having to spend extra time on turnover.

    The Future of UK Rentals

    With a 2023 Savills survey placing co-living as the third most invested-in living sector for property assets under management, there’s no doubt that flexible leases and multiple occupancies will feature heavily in the future of UK rentals.

    We are likely to see more investment in large-scale co-living spaces, not only in the capital but across the country, While London has so far been the key player in co-living rentals, regions across the UK are catching up with 6,879 co-living spaces outside London that are either under construction or have planning consent.

    With more developers thinking of investing in co-living communities, expert development advice is critical. An experienced team like AWH can provide accurate development valuations and advice on development at every stage, ensuring a solid investment and a head start in this burgeoning area of the market.

    It’s clear that the rental market is evolving to meet the needs of tenants who would otherwise be priced out of their areas, filling the gap between unfeasibly high rents and a turbulent buyer’s market. Whether co-living will remain a short-term solution for the majority of tenants or become a long-term lifestyle choice remains to be seen.

    While the property market’s gradual recovery from Brexit and Covid-19 plays out, investors can consider co-living a reliable source of significant return as more and more tenants choose communal living and flexible leases.

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