Modeled after student housing, leasing a bedroom rather than an entire unit makes city living more affordable for cost-conscious renters.
With apartment rents at or near record highs in many cities – they’ve climbed 22 percent in urban areas since 2010, according to Axiometrics – renters who would otherwise be priced out of the newest developments are opting for an alternative form of housing that allows them to enjoy the same amenity-rich lifestyle in the same location, all at a fraction of the cost of traditional market-rate apartments.
The tradeoff: they have to be willing to share their apartment with a roommate, or several in the case of larger three- and four-bedroom units.
It’s a model called co-living, through which developers lease at least a portion of their buildings by the bed rather than by the unit. If it sounds familiar, that’s because CA Ventures has been doing it for more than a decade in the firm’s off-campus student housing developments, where fully-furnished apartments are leased to college students paired through traditional roommate-matching services. Now, as those college students become young professionals and, unlike previous generations, move to urban areas that offer a live-work-play lifestyle, they’re fueling demand for high-rise rental housing that is both amenitized and attainable.
Not just for college students
In today’s so-called “sharing economy,” with services like Uber and Airbnb skyrocketing in popularity, apartment sharing falls in line with many existing spending habits, offering consumers yet another way to reduce their monthly expenses. Co-living is most popular among transient corporate workers, college students and young professionals that don’t feel the need – or have the budget– to lease an entire unit themselves, especially if they don’t see themselves spending that much time in it.
While the transition to co-living is likely easiest for college students and recent graduates, many of whom are already accustomed to roommate situations, the model is not limited to this demographic. In fact, as the baby boomer generation continues to age, co-living will likely work its way into senior housing as well, with more independent living communities also leased by the bed.
Across CA Ventures’ portfolio, the number of non-student co-living residents has more than doubled from less than 2 percent a few years ago to approximately 5 percent today. Urban properties, particularly those in areas with strong job and population growth, easy access to public transportation, and high walkability scores, contain an even higher percentage of non-students – between 10 and 15 percent.
Of course, co-living continues to be a hit in smaller college towns, especially those with dynamic job centers. At CA Ventures’ Uncommon Madison, an apartment community near the University of Wisconsin-Madison campus, nearly 10 percent of the residents are university employees and local professionals, many of whom work at Epic Technologies, a 30-minute drive or 45-minute commute by bus. Similarly, at Latitude Apartments, a CA Ventures community near the University of Nebraska, approximately 20 percent of the co-living renters are non-students, due largely to its location less than a half-mile from the Lincoln offices of leading sports technology company Hudl.
In many cases, co-living is offered in developments that also allow residents to lease an entire unit, assuming cost is not a factor. Typically the duration of each type of lease is the same, with 12 months being the norm, though landlords are becoming increasingly flexible to accommodate short-term work situations.
Keys to success
Co-living should be marketed in a way that presents it as a relative value to traditional market-rate apartments. At Arc at Old Colony, a transit-oriented development in downtown Chicago that CA Ventures completed in 2015, rents for a bedroom start at around $900 per month. The cost for single person to lease a one-bedroom/one-bath unit in that building would be $2,060, representing a savings of over 50 percent. Meanwhile, all units have the same finishes, including kitchens with Euro-style cabinetry, quartz countertops and stainless steel appliances. Residents also have access to the same suite of amenities, such as a rooftop deck with fire pit and grilling stations, 24-hour fitness center, club and game room, and several lounges.
The key to a successful co-living arrangement begins with the roommate-matching process. In addition to the standard background check, this involves surveying prospective residents about everything from their hobbies and interests to more logistical matters like scheduling to ensure compatibility. If a roommate dispute arises, the property manager sometimes has to play the role of mediator, similar to how they would address concerns among next-door or next-floor neighbors in a conventional rental building.
While essential in any residential development, security is especially important in communities with a co-living component. Key fobs are required to access not only common areas and amenity spaces, but also individual bedrooms within units. Video surveillance and on-site staff such as a 24-hour doorman can also help create a sense of security, a priority for many college students, including those who may be touring units with their parents.
Of course, co-living communities should also embrace the serendipitous social encounters they are uniquely positioned to provide. Just as co-living offers college students the opportunity to establish lifelong friendships with their classmates, it allows professionals to socialize and network with their peers as they adjust to life in a new city where they might not know anyone.
As a result, managers of co-living communities should offer flexible spaces designed to enliven a property 24/7/365, appealing to different lifestyles and personalities. Examples include an on-site coffee shop, business or media rooms with the latest technology offerings, and gaming or social lounges. Property managers should also promote community engagement through resident events such as open mic nights, poetry slams, game nights, group fitness classes and viewing parties for popular movies, sporting events and awards shows.
By making their communities accessible to a wider range of renters, experienced owners and managers that understand the nuances of the co-living model are well-positioned to maintain the competitive edge in a rental market that shows few signs of cooling going into 2017.
JJ Smith is Chief Operating Officer for Chicago-based CA Ventures.