By Allyson Portee
As urban living costs soar, millennials in the GCC are taking an interest in the trend of co-living. Investors are keen to invest, and real estate developers are listening to the demands from the market
Co-living is a lifestyle trend revamped by millennials. It’s like upscale dorm living but don’t think of it like your university days, it’s better. Residents of co-living share the same living space, do communal activities, but have their own room and bathroom. Office spaces like WeWork have taken on this shared concept too. But this sharing concept is more than just sharing, as community and deep relationships revolve around the members in co-living housing.
In the UAE, Emaar has two co-living projects that were purchased by one single investor. And while the trend is a newer concept in Dubai, with projects like Una in Town Square, Socio, and Executive Residences in Dubai Hills, there is the possibility for co-living to do well in the UAE, “as long as they are done and laid out right,” says Lynnette Abad, the director for research and data for Property Finder in Dubai.
Though it’s a revamped trend, the concept is not new. A century ago, it was common for people to rent beds. And the Chinese, which account for 19 percent of the world’s population, have been living in shared housing for years, as housing prices have always been a concern. And countries like India are taking to the trend too.
With Dubai’s large expat workforce, co-living has started to look appealing to those in the city who don’t want to be married to their rents. The 22 to 36 age range account for more than a third of Dubai’s population, and they’re looking for affordable rents but high-quality accommodation and good facilities.
According to a study done by Knight Frank, 25 million Americans have roommates, and this lifestyle has grown by 20 percent over the past 10 years. Cities like San Francisco, New York, Washington, DC, Chicago and Seattle have taken to the trend, and are likely to see more co-living residences breaking into their housing markets. And Dubai is paying attention to the success of co-living in the US and Europe.
Naturally, with such positivity around the trend, investor’s interest has been piqued. Since 2015, global funding for co-living has increased by more than 210 percent a year to now, according to Jones Lang LaSalle (JLL) commercial real estate firm. The trend has grossed more than $3.2bn, and so far in 2019, $800m has been invested into co-living companies.
The idea of a sharing economy is nothing new in Dubai. When it comes to co-working, Dubai alone has over 50 co-working spaces. When it comes to ride sharing, services like Careem and Carpool Arabia have taken off. And when it comes to homestay services, AirBnb and Beehive connect landlords with people needing short stay housing. And with Dubai launching freelance work permits for tech professionals at the end of last year, it will draw more tech talent to the city who will need housing. While Dubai’s aims is to lead the digital revolution, it certainly wants to be a part of what’s going on in the global sharing economy, which includes the trend of co-living that will attract tech talent.
Emaar property developers have already begun to bring the trend to Dubai, with the aim of making it more mainstream. Their first co-living project, The Collective, sold 400 units in one day, and the company has announced new co-living projects in different parts of Dubai. Gabriella De La Torre, director and strategic advisor for Coldwell Banker Richard Ellis, Middle East North Africa and Turkey (CBRE MENAT), says that Emaar’s development in co-living is a little different as units are being sold rather than being rented.
“This trend, however, is quite attractive for investors who would like to buy units to then place on the rental market,” she says. “As Dubai continues to explore and implement new initiatives to grow the knowledge and tech sectors in the emirate, it is expected that an increasing number of techies, entrepreneurs and millennials will choose to call Dubai their home, and this is the precise target market which co-living caters to: mobile nomads seeking community living at affordable prices within a hassle-free lease arrangement.”
Reza Merchant and Gunther Schmidt are two CEOs leading in the co-living space in North America and Europe, and Dubai and other international cities are watching the two to see how they carry the trend. Collectively but respective to their companies, the duo have raised over $2bn from the co-living trend.
Merchant started The Collective shortly after graduating from the London School of Economics. He found apartment hunting challenging and archaic. With London’s high rent costs, he began to feel isolated. “It was then that I really saw the gap that exists in cities all over the world, and our mission was born: to build and activate spaces that foster human connection and enable people to lead more fulfilling lives.”
Starting at a small scale in 2011, Merchant and his team set up an agency called Share in the City, against an AED8,927 ($2,429) bank overdraft.
Today, the Collective has two established properties in London and has opened a new location in New York’s Long Island. The company has it’s sights set on expanding to Brooklyn, Chicago, Miami and Dublin. And they’re growing at a rapid rate, having raised more than $850m to fund their international expansion from large institutional private equity groups, pension funds and lenders investing – from Cheyne Capital to Reditum Capital to Creandum.
For Schmidt, a natural entrepreneur, failed business ventures propelled him to a series of successful ones. Prior to launching Quarters, he started eKomi with his childhood friend Michael Ambros. Backed by Goldman Sachs, eKomi now has more than 15,000 customers and is Europe’s largest independent provider of transaction-based reviews and ratings.
But it was through the success of eKomi that Schmidt and Ambros saw a need for their employees to launch a workforce housing offering that would take the hassle out of moving to a new city.
Today, Quarters have locations in 15 cities in 14 countries spread out over two continents, with a newfound hefty investment from funders, and the company is steadily expanding. Their Berlin Klara-Franke-Straße location has rents starting out at AED135,350 ($36,842) and increase upwards. Chicago rents range from AED1,013 – AED2,209) ($276 to $601) and facilities include room, utilities, outdoor grills, outdoor cinema, rooftop skyline seating, laundry facility, internet, smart house technology, co-working spaces, a fitness centre and a bike room.
Publicly listed investors include Frankfurt listed Corestate Capital Holding, one of Europe’s largest real estate investment managers. They are Quarters’ partner on the AED3.67bn ($1bn) raise for their European expansion. And the W5 Group, the family office of Ralph Winter, is Quarters’ partner on the AED1.11bn ($302m) raise for their US expansion.
The success of Merchant and Schmidt, raising 10 figures has contributed to the UAE developing in the space.
Investors are seeing a return on their funding, plus the supply and demand gap is being bridged, while the trend is creating a huge opportunity across new markets. Investors are keen on investing in Dubai because it’s cosmopolitan.
“People of different origins and experiences are constantly drawn to the dynamic nature of its offering, and ultimately real estate developers are looking to provide a niche to their product offering, particularly in a city where supply outpaces residential demand,” says De La Torre from CBRE MENAT. It’s a trend that’s taking off across the world and gaining consideration locally.
She goes on to say that “co-living provides a new, unique residential offering within a highly competitive market, making it attractive to investors”.
“Furthermore, investors have witnessed the strong growth of this real estate typology across the globe and envision the same trend within the UAE, particularly given its very young population and increasing focus on developing knowledge and tech sectors – key potential demand sources.”
But while the trend of co-living is taking off and investments are in the 10 figures, not all are buying it. The trend has become a dirty word in Ireland, where Merchant will be opening a property. Recently, Eoin Ó Broín, a member of Ireland’s Lower House, put forth a bill to ban co-living from developing in the country, after Housing Minister Eoghan Murphy backed the trend with the publishing of the 2018 Sustainable Urban Housing Design Standards for New Apartments, due to Ireland’s housing crises.
In a public statement, which Merchant directs Arabian Business to, he states: “Sinn Féin opposed the new mandatory guidelines, arguing that they would reduce the quality of life for apartment dwellers, while at the same time push up prices as they added significantly to the value of development land and in turn rent or purchase prices. [My bill] would mean an end to the spectacle of co-living and other developer-led changes made under Minister Murphy,” he argues.
In Dubai, Abad of Property Finder Dubai is hopeful but is waiting to see if the market takes to the trend.
“It will be interesting to see what happens when these projects are completed and units hit the market,” she says.
“Considering this is a new concept in this market, I will be curious to see if the owners are conscious about this when pricing their units, which will lead to the success or demise of the projects.”
Dana Salbak, an associate in real estate, market research and analysis for JLL MENA, shares Abad’s sentiments.
“In order for the concept to succeed in Dubai, certain necessary elements need to be present, such as good connectivity (road network), especially when developments aren’t in central locations,” stresses Salbak. “Flexibility is key as well. Globally, co-living is done on a month-to-month lease basis, so it’ll be interesting to see that model in Dubai where we’re used to quarterly, six-monthly, or even annual lease terms.”
De La Torre shares that “at the moment, co-living projects in Dubai are predominantly offered on a built-to-sale model rather than the traditional lease model which we see in the West. In the case of the typical target market – entrepreneurs, recent graduates, etc – this target market may not necessarily have the purchasing power or the willingness to purchase a residential unit.
This target market tends to be more attracted to a lease model due to reasons of convenience, flexibility and affordability.
“Furthermore, there are a number of regulations that would need to be met for the co-living concept to prosper to the fullest in our region, as is the case in the West,” she goes on to say.
“While companies and government entities across this region recognise the market gap and need for this product offering, there is a cultural bridge which also needs to be met. At present, this notion is often confused with the offering of serviced apartments, yet the main difference lies around the community aspect. We expect that increasingly, regulations permitting, developers may choose to provide co-living units for rent within strategic locations of Dubai or as part of vibrant, mixed-use developments.”
Whatever you conclude from co-living, the numbers don’t lie. The trend is rising, the real estate market has been disrupted and investors are investing.
Co-living is en vogue and as people gravitate to urban centres to work and live, and as the price of living increases, the trend is expected to do well.
Both Schmidt and Merchant see co-living as a lifestyle that will add value to the real estate market and markets around the world.
So, if you’re on the side of disliking co-living, you may find yourself changing your views as the trend continues to catch on and soar around the world.For all the latest Property news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.