Co-Living Comes to Canada
As Canadian workers flock to major cities, housing prices and apartment rents are going up.
Young professionals looking for quality finishes and a lower price tag are the target of a new housing trend sweeping the U.S.
“Co-living” is the latest offering from real estate companies looking to house growing urban populations in a way that’s cost-effective for both tenants and developers.
For the same price as a regular one or two-bedroom apartment, co-living offers residents fully-furnished smaller units with common living areas and amenities.
The ability to accommodate more tenants in less space lends financial viability to the co-living business model as land and development costs continue to rise.
And, as residents of big cities continue to struggle with loneliness, co-living buildings advertise a “built-in community,” where like-minded residents can meet and mingle.
While most major co-living companies have yet to enter the Canadian market, recent expansion announcements are a sign that they’re beginning to make their way north.
Knowing which markets to watch – and what to watch for – is essential for those looking to make the most of this growing trend.
The Millennial Market
Developers are scrambling to appeal to the Millennial market, which now represents Canada’s largest generation at 27.0%.
As income levels struggle to keep up with skyrocketing home ownership costs, more and more Millennials are choosing to rent, making co-living an attractive possibility.
Co-living companies know this, structuring their offering towards young-professionals looking for an affordable higher-end apartment, who don’t mind socializing with others their age.
They’re also betting that Millennials tendency to wait longer to marry and have children will mean they’re more willing to entertain the concept of a shared living space for longer.
As rental vacancy rates in Canada’s largest cities remain stubbornly low, the country’s young workers are willing to creative about where they live, and how.
The Silver Tsunami
Many co-living companies have also expressed interest in capturing another demographic – seniors.
As Boomers continue their shift into retirement, many are looking to downsize. For those who would rather rent than own, co-living could become an attractive solution.
The model would tackle many issues faced by seniors, including accessibility, isolation and home maintenance.
Loneliness is often pointed to as a serious health concern for older Canadians, who spend more time alone once they leave the workforce.
Co-living buildings could provide a sense of much needed community, and a chance to socialize with a new mix of people.
The Tech Factor
Of course, the concept of co-living is particularly attractive to tech workers, known for their preference for convenience and high-end features.
By the end of next year, co-living company Node will have launched its first building in Kitchener-Waterloo, hoping to gain traction with the area’s pool of young tech workers.
Once there is proof of concept in Canada, Toronto could be next.
Toronto tech companies grew their job pool by a staggering 54.0% from 2013 to 2018, part of an expanding Canadian tech scene that is the ideal landscape for co-living.
The city also has some of the highest home prices and apartment rents in the country, making a new housing model all the more attractive to young tech workers hoping to get the best experience for their money.
It remains to be seen how many young people will buy into the trend. While in-house cleaning services and regular pub crawls are nice, paying more for less square footage can be a hard pill to swallow.
Those looking for community may also find themselves disappointed.
While some co-living companies offer only a few units per building many, like WeWork spinoff WeLive, aim to increase their profit margins with hundred-unit buildings, which could limit friendly interaction between residents.
Investors Are Paying Attention
Demand for affordable housing has propelled multifamily units to the forefront of the commercial real estate market.
Despite strong returns and a favourable forecast, rising rents and falling vacancy are still pushing apartment owners to innovative to capture new business.
Co-living providers must be willing to navigate unique challenges, including high turnover and non-standard lease terms.
But while there are risks, investors – who initially shied away from the expense of building new formats for an untested market – are starting to warm to the concept.
As co-living begins to spread across Canada, investors should seek advice from a partner they trust. Staying informed is the first step to building advantage and keeping ahead in a competitive market.