Investors can afford affordable student housing

Co-living buildings are efficiently designed micro suites and micro studios opening the prospect for ‘micro’ real estate investing.


The shared economy model gave rise to multiple new real estate designs. Co-living buildings are efficiently designed micro suites and micro studios that open the prospects for ‘micro’ real estate investments. Initial investments into micro-spaces on a per square foot basis are similar than in traditional economy-class apartments while the rental income is at least 25% higher, according to industry experts.

Co-living is not just about finding a roommate to split the rent: it is also the idea of community management that has developed around the concept of a new class of high-end living spaces, something like fancy dorms for grown-ups. Co-living is on the rise and although it has had its ups and downs along the way, there is huge potential in the future as young people living in big cities come to see sharing living spaces with roommates as the ‘new norm’. Many come to prefer the benefits of living together with a group of like-minded young professionals in high-end buildings with much better amenities than they could otherwise afford if living alone.

The concept of co-living is gaining traction with landlords and proprietors, though market penetration has been slower than expected. It is a concept still in the ‘baby stage’ with operators facing many challenges with their commercial and operational model. From the outside looking in, co-living would seem to be little more than the rebranding of the hostel business model, with added amenity space. Many of the newest student campuses are conceptually similar to the projects originated by Ovolo, a Hong Kong-based hotel and serviced apartment operator that has branched out to co-living. According to Tom Alpe, an Ovolo representative, the design development brief for their projects has less focus on square footage and more on the functionality of the space.

The new accommodation style, as exemplified by Alpe’s team, is the main benefit of co-living spaces. Typical homes are designed to be environmentally friendly with residents sharing certain community resources, such as tools or office equipment. Common spaces typically include guest rooms, laundry facilities, large kitchens and dining areas, recreational facilities and libraries. Some communities have common gardens, walking trails and even shared farms. Many co-living spaces include a co-working space for those who telecommute.

Hangzhou and Hong Kong-based firm LYCS Architecture came up with the design of Campus Hong Kong, an experimental project using based on the shared economy model that could signal a change in light of the rising rent problems facing major cities in China. Given the limited space and high living expenses, the architects produced a new and more affordable format to accommodate young people and students, located in Hong Kong’s Tsuen Wan District, where an existing hotel was renovated to accommodate 48 student apartments located in the lower 3 levels of the building.

Urban housing supply is already feeling pressure worldwide with 54% of the global population of 7.2 billion living in cities, according to the most recent United Nations World Urbanization Prospects report. By 2050 with the forecasted world population reaching 9.6 billion, the number of city dwellers is expected to rise to 6.3 billion or 66%. In North America alone about 82% of the total forecast population of 473.8 million people will live in urban areas. The number of single-person households is rising, although housing has not kept pace with demographic change. Many of the new units being built are getting smaller and smaller, challenging municipal housing codes and zoning regulations.

Worldwide co-living is associated with millennials (people in their 20s and early 30s). As the need for affordable housing within traditional city boundaries continues to grow and the urban traffic situation worsens, the landscape of residential real estate is bound to change. Co-living, as an emerging asset class, will soon see established developers entering the market. It’s only a matter of time before co-living becomes a long-term solution to the urban housing crisis. Not just for millennials, but for various niche groups, like senior citizens.

What do senior housing and student housing have in common? In fact, quite a lot. Both concepts are built around the idea of community and access to shared services. For both seniors and students, it is important to find like-minded people for socializing. One group’s primary focus is access to good medical care, while the other looks for easy commuting to desirable educational institutions. Both groups don’t really think about how much they pay in rent on a per square foot basis. Interestingly, both of these segments, senior and student housing, are unbelievably profitable in the context of the broader European real estate market.

According to JLL, co-living offers a higher yield to its owners than traditional housing, accounting for an additional 25% to 50% of annual income. Many micro-spaces, such as students’ rooms in Campus Hong Kong, mentioned above, are already tokenized. Blockchain real estate platforms, such as the one being developed by Thaler.One, allow investors to take ownership of quality real estate assets worldwide, including co-living spaces. By pooling your resources with multiple other investors, you can benefit from the growing market for student housing, quite literally getting a ‘share’ of the shared economy.