They used to be called group homes and were once an informal and for the most part uncounted part pf the multifamily market. Now called coliving, this niche is far more formalized and definitely being taken into account. Major operators in the space currently have 3,700 beds with another 9,300+ in the pipeline, with a high concentration in New York, Los Angeles, Chicago, Boston, San Francisco and Washington, DC, according to a new Cushman & Wakefield report.

An Institutional Favorite?

It predicts that over the course of the next five years, significant capital will be deployed toward delivery of thousands of more beds across the world. With renters accounting for 65% of the under-35 cohort and only an estimated 5,000 coliving beds currently available, coliving is at a tipping point and increasingly on the radar of institutional investors, C&W says. "Coliving follows in the footsteps of niche asset classes like medical office and senior housing that began with a small footprint but have an increasingly large presence in investor portfolios," says Cushman & Wakefield Managing Director Susan Tjarksen. "Demand is proven. Yet, there is still a lack of supply despite market expansion, and this enables institutions to enter during this inflection point. The ability to deploy large amounts of capital in a relatively new and small arena will have an enormous impact. However, this impact will shrink once more coliving companies emerge and more institutions with capital enter the fray."

Demand Drivers

The race for talent among companies is playing a role in coliving's growth, as are the increasingly higher housing costs in gateway markets. Indeed, C&W predicts that coliving options will see growth in official affordable housing options. Demographics are also playing a role in coliving's advance. "Coliving options will become more ubiquitous with recent college graduates seeking to join a community and learn about a city that they are living in for the first time," Tjarksen says. "As new generations enter the rental market, preference will be centered upon coliving brands that provide convenience, affordability and a vibrant community." See our slideshow above for more details about the companies that are making a mark in this space.