Prior to March 2020, co-living properties were rising in popularity, offering a 30% discount on gross housing costs on a per-lease basis. At the same time, operators generated 15% higher NOI than the industry average due to increased density. And as renters look for more affordable housing options, co-living will likely garner increased demand post-pandemic, according to a co-living report from Cushman & Wakefield. As a result, most industry experts believe the overall valuation impact has been less severe for co-living properties than for multifamily. Indeed, the sector was outpacing multifamily valuations pre-pandemic and seems poised to continue.

But that is speaking generally. When conducting such an analysis, It is important to distinguish between the different methods of valuing co-living arrangements versus traditional multifamily developments. Participants in CBRE's weekly podcast tackled this subject recently.

Co-living concepts typically sit in the established range of yields for predominantly long-stay schemes. An important caveat to note is that in many cases, co-living has slightly different and shorter-term lease structures and if there is an element of short stay, that needs to be treated slightly differently, according to Jo Winchester, CBRE executive director. That type of long stay would impact the valuation of a co-living arrangement, she said, adding that long income is co-living's core income. This was more apparent during the past year where corporate demand, i.e., office building occupancies and overseas travel, has been impacted by Covid.