At first glance to some observers, these two styles of living accommodation are similar and probably quite interchangeable. To others, it may seem hard to imagine how one could blend with the other.
Simply put, would young professionals and essential workers wish to share living space with students, and vice versa? Are the two groups that different? Can Student Housing really be as “multi-purpose” as it seems?
There are no hard and fast rules – already some Co-living spaces are commonly shared with students as well as others who are not at college – and they seem to work well. However, from an investor’s point of view it’s important to know your market and demographics, as that can give you a clearer and more informed overview of your investment expectations.
In this Studivest article, we have put together some perceived differences between the two groups that should be considered:
Age and behaviour
Typically, Co-living residents will be at least a little older than students, but many will have only recently left full-time study themselves so it’s unlikely they would to be that far apart in age and lifestyle. It is also fair to say that many people’s view of “student digs” or “student living” is a reflection of their time at university or what they’ve seen in popular media. Untidy and run-down attic rooms are increasingly a thing of the past. Purpose built student housing has transformed the accommodation now provided to many young people (but still not enough!) and modern, fully-finished student housing blocks are increasing in number and quality, and the residents themselves match that with their own mature attitudes to work/life balance and taking care of their living environment.
Generally, in attitudes and approaches to work, leisure and lifestyle, there is little between the two groups and, it’s fair to say, a lot more in-common than one may think.
Who pays the bills
This should be considered carefully as student’s bills (including rent) are often funded by parents who have carefully budgeted their children’s higher education over long periods of time – independent young adults would probably be funding themselves. Often, universities will lease rooms for their students and that’s a further plus for student housing a property owners have guarantees of payment.
However, don’t overlook that many employers will lease whole floors of rooms for their employees, this is especially commonplace where large contingents of skilled workers are required in new locations. In our focus markets, the CEE region, this is an important point as many staff will come from abroad or other parts of the country and would be attracted by an employer-funded accommodation scheme.
Generally, young professionals are above-average earners too, and therefore would tend to be good-payers so this difference is certainly much less defined than one may imagine.
Length of tenancy
Students will often occupy the same room for the full length of their university course – that could be anything up to three years in some cases. Co-living residents may be more mobile as work could take them to other locations after only a short stay. Therefore, there could be a difference in length and certainty of tenancies which is a bonus for PBSH as you have less need of re-advertising and less acquisition cost etc.
However useful it is to have some certainty of long-term tenancies though, some operators may prefer to have shorter-term tenants; they may like the flexibility that short-term renters provide, more regular rent increases for example, and the ability to lease out rooms to other user types (more about this later in this article).
A blend of shorter and longer-term tenancies could well be attractive so again, students and Co-living residents in a mixed-use scenario could work well together from the operator’s perspective.
Close proximity to universities and employment, social activities and retail outlets are usually common requirements for both demographics. Students, young professionals and essential workers alike will want easy to access to bars, restaurants and shopping facilities and often these will be close to city centres and business districts.
Every city centre is different but, on balance, both groups of potential residents would share the same need of facilities and amenities that should be close by to their homes.
When assessing the investment potential of any investment, a key factor is its flexibility to adapt to changing market conditions and demographics. This is the often-overlooked advantage that Student Housing has over other real estate asset classes.
A retail shopping centre has little flexibility to become something else – shops are shops. With office blocks, although the tenants’ business models and industries may change, their usage is usually fixed.
Student Housing and Co-living units however, are very flexible in their usage and investors can rest assured that having this ability to “morph” into professional, essential worker, hotel and/or student housing, is a valuable benefit.
What is also being seen these days, is the flexible work spaces or Co-working concept. These flexible solutions to modern working are becoming increasingly popular, especially in the Technology sector where smaller co-working, often Start-Up units are being created in apartment buildings in residential areas or other convenient locations.
Students, who may be seeking work-placements or future employment opportunities, and business entrepreneurs who could be providing these opportunities, will increasingly occupy common spaces where this can flourish.
Some commentators say that in the next few years, there will be no differences at all – we’ll be providing accommodation for younger people with specific needs that can be easily matched with the flexible design-and-use options being built into modern student and Co-living accommodation.
This could be a very clear sign that Student and Co-living (or MicroLiving) are more and more likely to become inseparable, that these well-located and carefully-designed living spaces have very broad and flexible uses – to an investor’s ears, that could be just the music they like to hear.