Upwardly mobile consumers are leasing private rooms in urban buildings, sharing upscale kitchen and living spaces with other like-minded people.
This trend may not seem like a relevant topic for residential real estate agents based in the suburbs.
But any agent who wants to know the full scope of clients’ housing needs over a lifetime should take notice of what is happening in the co-living space with companies such as Common, led by entrepreneur Brad Hargreaves, who spoke at an ICNY panel session, “The New American Dream: How co-living is disrupting real estate.”
Common, called the most advanced of the co-living start-ups by The New Yorker, rents whole apartment buildings and then sublets furnished rooms in shared units, with a number of services — from weekly cleaning to utilities — covered in the rent.
This type of arrangement is appealing to consumers from all generations taking a pause between their next home buying decision.
The range of people interested in co-living is much broader than you might think, said Hargreaves.
“We saw that a lot of people were living with roommates, which people would often associate with students, but they were actually people further into their careers — and then there were also empty-nesters who wanted to live with others.”
To want to spend time with other people is a human need, added Drew Oetting, founding partner at San Francisco-based tech investment firm 8VC, an investor in Common.
Oetting sees Common’s offering as an innovative product which works well for real estate owners because of the yields it offers them. He said companies such as Common are highly complementary — they are enlarging the class of real estate as an investment.
“We saw a need for something higher end but still designed for community living,” said Hargreaves.
Renting out 150 rooms recently attracted 12,000 applications, he said.
An alternative to ‘Craigslist scary’
Common is filling a gap in the market, said Hargreaves.
“We had seen nothing between Craigslist-scary and going and hiring a broker and looking for a very traditional apartment that way.
“If you look at who is living in Common, it would be the top 5 percent of people in Craigslist,” he added.
Hargreaves laid out some interesting statistics — that the average person under 35 stays in a job for 16 months and when he changes jobs, he often changes cities, too.
Common buildings are currently in New York, Washington D.C. and San Francisco. As they move to these cities and others, Common clients will see the same restaurants, the same retail, the same buildings which will feel similar to them, said Hargreaves.
What is really disrupting the real estate industry?
Is co-living disrupting the real estate industry, panel host Katie Maxell, asked?
Demographic and macro trends are already disruptive, argued Hargreaves. “We are seeing people delaying marriage and staying in cities longer, delaying buying into their thirties.”
The question agents should be asking themselves, he said, is what are these millennials going to be doing once they start families?
Will they move out to the suburbs as their parents did? If so, suburbs will have to evolve to meet the needs of this new generation of homebuyers.
Hargreaves pointed out that it is three times more likely that a young person today does not have a driver’s license — so when the time comes to buy or rent something bigger for their families, they might well not feel comfortable about moving to the traditional suburbs where they would need a car. (Or if they do, the suburb would have to have good public transportation.)
It may be perhaps that when they are ready to have a family and need more space, they might go to another area that is not a traditional suburb, said the Common founder.
Speaking later, Hargreaves added: “They might move from Brooklyn to Yonkers or Stanford, New York — bedroom communities that still have that urban feel, that have transit access and do not feel suburban. It’s like a suburban starter-kit.”