The nascent co-living sector is set for an explosion of growth, with developers bringing forward a multitude of new schemes across the UK. Investors are exploring opportunities in this emerging asset class, and residents are becoming more familiar with the benefits offered by co-living homes.

Gaining momentum

Co-living is a relatively new housing concept in the UK, with the country’s first purpose-built co-living schemes being less than a decade old. However, the sector is now growing at an accelerated pace, and set to form an increasingly significant part of the overall BTR market as it becomes a more tested solution to the delivery of good quality, affordable urban homes.

At present, there are 8,425 beds in large-scale purpose-built co-living schemes across the UK, representing just 7% of the UK’s total BTR stock. However, the sector is poised for rapid expansion with a further 16,534 beds in schemes either under construction or with planning approved, and an additional 9,694 proposed beds at earlier stages of planning. Co-living schemes represent more than 15% of the total BTR development pipeline.

UK CO-LIVING SUPPLY (NUMBER OF BEDS)

Mirroring the evolution of multifamily BTR, Greater London has been the initial focus for co-living development but, as the sector enters its second wave, developers and investors are increasingly exploring opportunities in regional cities. Prior to 2024, the capital was home to more than 80% of the UK’s operational co-living beds; however, the delivery of more than 2,000 beds in Manchester last year has seen that drop to 60%.

Made in London

London’s co-living schemes include early pioneers of the concept such as Old Oak Collective (546 beds) and ARK Canary Wharf (705 beds), which opened in 2016 and 2019 respectively. More recent completions include multiple schemes delivered by the developers Dandi and Halcyon, including Dandi Wembley (335 beds); and Halcyon’s Sunday Mills, Earlsfield (315 beds) and The Palm House, Harrow (222 beds). In addition, Outpost Management’s Enclave: Croydon was completed in 2022 and is currently London’s largest operational co-living scheme with 817 beds.

GREATER LONDON CO-LIVING LOCATIONS

Schemes under construction or with planning granted are set to provide London with an additional 8,837 co-living beds. Among those close to completion is The Rex, Kingston upon Thames (215 beds), which is due for delivery in 2025. Meanwhile, a recent spate of planning approvals has included Cornerstone (174 beds), which is noteworthy as the City of London’s first consented co-living scheme.

Significantly, co-living elements are becoming an increasingly common feature of large-scale mixed-use and master planned projects across London. Co-living units are included in the redevelopment proposals for sites including Earls Court, Meridian Water, Lewisham Shopping Centre and Imperial College’s One Portal Way.

GREATER LONDON CO-LIVING SUPPLY (NUMBER OF BEDS)

Radiating to the regions

Manchester’s great leap forward into the co-living sphere came with the completion of the first phases of the Square Gardens and Union Co-Living developments in 2024. The second phases of these schemes are due in 2025 and, when complete, both will provide close to 1,700 beds.

UK REGIONAL CO-LIVING LOCATIONS

Co-living is gaining footholds in other regional markets. Operational developments include The Gorge, Exeter (133 beds) and The Guild by Morro, Guildford (113 beds), while numerous other cities are set to see the delivery of new co-living properties in the medium-term. In total, 46% of consented and under construction co-living beds are located in the regions. Schemes gaining planning permission over the last year include Headrow House, Leeds (230 beds), Knox Court, Cardiff (203 beds) and 1-4 Wells Road, Bath (77 beds); all of which promise to deliver these cities’ first co-living schemes.

REGIONAL CO-LIVING SUPPLY (NUMBER OF BEDS)

Varied co-living options

Co-living properties place an emphasis on communal living by providing residents with a mix of small private spaces and larger shared spaces. Residents will usually have access to their own bathrooms and, in many cases, basic private kitchen facilities. Communal areas and shared facilities may include larger kitchens, dining rooms, living areas, workspaces, laundries and gyms.

The accommodation offered can take several different formats, sometimes within a single development. Some co-living homes are compact en-suite one-bed flats or studios with their own kitchenettes; while others are 2, 3 or 4 bed en-suite units, rented by the bedroom, with residents sharing a kitchen area. Other co-living properties use a ‘cluster’ model, with groups of 4-8 en-suite bedrooms arranged around communal living, kitchen and dining areas.

Perhaps confusingly, the co-living label is sometimes used in the marketing of other forms of accommodation such smaller house shares, serviced apartments and properties primarily intended for shorter stays. These are not included in our pipeline analysis; instead, we adhere with the London Plan’s guidance that large-scale purpose-built co-living assets should usually have at least 50 units, with minimum tenancies of three months.

Diverse tenant appeal

The growth of co-living has been driven by rising demand for good quality, affordable rental homes in central urban locations; particularly among groups who have been priced out of home ownership or more conventional rental products in recent years.

Co-living residents are typically characterised as young single tenants; primarily recent graduates, early-career professionals and international residents. Reflecting this, co-living operator VervLife reports that the average age of residents across its London portfolio is 28. However, other operator evidence indicates that the tenant profile is diversifying, and becoming older, as the sector becomes a more established option for renters.

The community and social aspects of co-living are among its key attractions. In addition to providing an array of shared spaces, co-living operators will often organise regular events, giving residents opportunities to meet new people. However, co-living also provides flexibility, allowing each tenant to use a mixture of private and shared areas in ways that suits them individually.

All-inclusive rents add to the appeal of co-living schemes, with rents usually including council tax, utility bills, wi-fi, room cleaning, and access to facilities such as gyms and co-working spaces. While this means that co-living rents can appear relatively high at first glance, the total all-in cost of living will usually be lower than in alternative PRS accommodation where these expenses are not covered by rents.

Location is key to the success of co-living schemes. With many residents reliant on public transport, close proximity to transit hubs, shops and other amenities is essential. The prime sites for co-living schemes are those that will provide tenants with opportunities to live in well-connected central areas lacking other affordable rental options.

The Palm House, Harrow. Developed by Halcyon and operated by Folk Co-living

Planning challenges

As a relatively new form of housing delivery, much of the first wave of co-living development has been delivered amid an absence of specific planning policy. There are no national-level planning policies relating to co-living development, and it is not referenced within the recently-revised National Planning Policy Framework (NPPF). Large-scale purpose-built co-living schemes are predominately treated as Sui Generis, meaning that Nationally Described Space Standards (NDSS) applying to residential (C3) schemes do not apply, and also that conversions to co-living cannot be delivered using Permitted Development Rights.

More detailed local planning policies are gradually emerging around the sector. Most notably, the London Plan introduced Policy H16 on co-living in 2021, terming it ‘Large-Scale Purpose-Built Shared Living (LSPBSL)’; and the Greater London Authority adopted guidance on how to apply this policy in February 2024. The guidance provides a relatively flexible framework for the delivery of co-living schemes. It includes recommended benchmarks for amenity space provision, and states that private units should be between 18-27 sq m.

A minority of London boroughs include references to co-living within their adopted Local Plans, but it is not specifically mentioned in any adopted Local Plans outside the capital. However, references to co-living are beginning to appear in a growing number of draft and emerging plans, including those of Southampton and Reading. In most cases, these are broadly supportive to co-living development.

Non-statutory supplementary guidance on co-living has been issued in several cities including Liverpool, Leeds and Birmingham. While they carry less weight than Local Plan policies, some of these guidance notes take more restrictive stances. For example, Liverpool’s Co-Living Planning Policy Advice Note, issued in 2022, explicitly states that schemes should adhere to NDSS standards.

An inconsistent approach to co-living planning policy is thus emerging across the country. Developers will need to be aware of the level of support given locally; and to deliver good quality schemes that demonstrate to planning authorities that co-living is an appropriate form of housing delivery.

Increased investment opportunities

To date, a lack of cohesive planning policy and the relatively untested nature of the co-living concept have been the main barriers to investment into the sector. However, an increased volume of capital is now being attracted, as co-living becomes a more accepted model for the cost-effective delivery of city centre homes.

Co-living investment reached £250m in 2024, taking volume over the last five years to £1.1bn. Last year’s deals were concentrated in London and included CDL’s forward funding of Yardhouse, White City for £88m; and DTZ Investors’ funding of a £100m scheme at Brent Cross Town. In addition, Realstar Group acquired Brixton Junction, a 63-bed operational co-living asset, for more than £20m; while HUB and HIG acquired a plot in Lendlease’s Elephant Park masterplan for £42m, for a mixed-use development including co-living homes.

With stabilised assets in short supply, investment activity is likely to be concentrated on funding and development deals in the medium term. The pace of funding deals should accelerate as more development schemes are brought forward; and there are several live opportunities in the market from developers seeking funding partners for consented schemes.

KEY INVESTMENT TRANSACTIONS

The next wave

The co-living pipeline is full of promise and the potential demand for these homes is huge. Nonetheless, there will still be significant planning, funding and development challenges to overcome before schemes currently in the pipeline are brought to completion. The barriers to co-living development should lower as the sector grows and becomes a more established style of city centre living. Co-living is increasingly recognised as a viable development option in London, and it is well placed to become a more mainstream proposition in regional cities over the next few years.

This article is an extract from LSH’s forthcoming BTR Report 2025, which will be published in the Spring. Look out for the full report for more of our market-leading BTR analysis.