Millennials have been a major source of disruption to all kinds of markets. The one we’re talking about today is the property market and the emergence of co-living as a trend, which has seen global funding in the sector increase by more than 210% annually between 2015 and 2019, totaling more than $3.2 billion, according to JLL. While it is easy to chalk it up as another trend attributed to millennials and their obsession with short-lived fads of of all kinds, this one is not entirely their fault.
No, this one falls on overpopulation and basic demand and supply mechanics.
The only way to go is up
You see, as more and more people seek the busy city life and the promising careers it offers, there has been a significant supply deficiency. There are simply much less houses and apartments than people, and so prices will rise. It’s basic economics.
According to the National Association of Realtors, average house prices in the US didn’t exhibit a single decline from 1968 to 2004, a whopping 36-year period. In fact, they showed an average yearly increase of 6.4%. Around the time of the of the 2008 recession, prices dropped naturally, but prices have since only seen upward momentum.
In the UK, house prices increased 207% over the past 20 years alone, between 1999 and 2019. In London, they increased by 239% over the same period.
Even in a city like Dubai where property prices and rent values have been dropping in recent memory, prices can be intimidating. For example, a quick search on property listing site Bayut.com shows the rent of studio apartments in Dubai ranges from AED 2,500 ($680) to AED 17,100 ($4,660).
With wages barely increasing in recent years when adjusted for inflation from pre-recession levels, as per the Economic Policy Institute, and a worldwide inflation of property prices and rent, it is only natural then that millennials and other savvy city dwellers would opt for co-living.
The rise of co-living
Given all these elements, it was only a matter of time before co-living would grow in prominence, as millennials and other cash-strapped individuals look for more affordable options to live in the city.
Aside from it being a monetary measure, millennials in nature seem to enjoy communal living. As part of Gen Y’s emphasis on the balance between individuality and community, co-living seems like the perfect balance between the two.
“We don’t just ignore each other and go about our day when we’re stressed out… I’ll actually drop in and be, like, ‘What’s going on in your life?'” Jay Standish, the co-founder of co-living startup OpenDoor, told Business Insider about the communal lifestyle. “It’s a way to start the day that’s actually honoring my humanity.”
Jay not only operates a co-living startup, but also lives in one of its properties. As Business Insider explains, this has become a growing trend, where employees and founders of all kinds of startups and SMEs are buying into the excitement of residing in a co-living space. Cuisine sharing, morning walks, movie nights and more are all par for the course when living with others, not much different from life in a university dorm. For many millennials, this is a draw for them, as it keeps them in touch with their younger, more spirited selves while navigating the treacherous corporate world they find themselves in after university. Also, given the trend of people returning to live with their parents in light of unaffordable housing, this offers them another option.
In the UAE, the concept remains mostly foreign to national and expat denizens, though co-living projects are currently being experimented by leading developers such as Emaar, real estate consultancy Savillis notes. Real estate advisory firm CBRE expects co-living models as well as the key drivers impacting these shifting spaces to continue influencing other real estate sectors in the GCC nation moving forward.
Co-living as a choice
The concept of co-living has become so alluring for many that it’s reason for being has kind of done a complete 180 degree turn. That’s because there are individuals who are actually paying a premium to be able to partake in the co-living experience, given the benefits and convenience it often offers.
“In some cases, the perks [of communal living] are so great that residents pay a premium to live there,” CNBC explained.
Haven, a co-living community, has identified this market gap, and caters to it.
“At Haven, the focus is on health and wellness, and residents are encouraged to share their specialty, whether that’s teaching a yoga class or cooking lessons in one of the four chef’s kitchens,” CNBC said. “In return, the rent is reduced to $995 a month, including linen and towel service and streaming entertainment subscriptions such Hulu, Netflix and Amazon Prime.”
Given the high disposable income of GCC nationals, we could see this premium take on co-living experimented with, though conservative values across the region are likely to put a hindrance on this, limiting these spaces to single-gender configurations. Regardless, the potential is there, especially with the increasing number of expats in the country that are always on the lookout for cheap and alternative methods of living.