El Coliving has emerged as an innovative solution in the real estate sector, responding to changes in lifestyles and housing needs of an increasingly connected society. East shared housing model, which combines private spaces with common areas and additional services, has positioned itself as an attractive option not only for residents, but also for investors.

In this article, we talk about the reasons behind the coliving boom, the opportunities it presents for investors, and the challenges it faces in a constantly evolving real estate environment.‍

What is coliving and why is it booming?

Coliving is a growing trend in the real estate sector, designed to promote coexistence and cultural exchange among residents. This concept has gained popularity in recent years, especially among young professionals, digital nomads and people looking for a place to live, and to share it in community.

La The essence of coliving lies in offering a life experience that goes beyond traditional renting, integrating social services and activities. Residents enjoy amenities such as shared workspaces, organized events and recreational areas, all within a single complex.

This model, in which spaces are optimized and additional services are offered, is revolutionizing the real estate market, attracting the attention of investors looking for new coliving investment opportunities.

Reasons to invest in Coliving

The rise of coliving responds to several factors, ranging from the growing demand for flexible housing and a generational shift towards more collaborative and less conventional ways of living, to rising real estate prices.

These reasons have made coliving an attractive and profitable alternative in the Coliving real estate investment. According to the European Coliving Index, carried out by JLL, already in 2019 this sector showed rates of expansion and growth in different markets in Europe and the United Kingdom:

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Specifically in Spain, and according to data from CBRE, it is estimated that the stock forecast for flex living will double to almost 20,000 beds by 2025. A panorama that gives us a glimpse of how the future of coliving has enormous development potential.

Here are the main reasons why investing in Coliving can be a profitable option:

High demand

The demand for Coliving spaces continues to increase, driven by changes in living and working habits. La labor mobility, the rise of remote work and the trend towards minimalism have made many people look for temporary housing with added services, which guarantees constant occupancy.

Profitability

Compared to traditional rentals, the coliving model makes it possible to optimize space, since more people can live together in the same property. This generates higher coliving profitability, maximizing revenues per square meter.

Diversified market

Although coliving is primarily aimed at young professionals, it is also gaining traction among students, expatriates and active retirees. This diverse market offers flexibility and stability to investors, as they can adapt their offer according to the demographics of each location.

Innovation in the real estate sector

Investing in Coliving is betting on a model that combines technology, efficiency and services. Digital platforms for managing these spaces, together with optimizing the use of resources, offer added value for investors.

Strategies for a successful investment in Coliving

While coliving offers many advantages, a successful investment depends on following certain key strategies that can make the difference between success and failure:

‍1. Selecting the location

‍La locational is a determining factor in any real estate investment, and coliving is no exception. Large cities, university areas and areas with a high rate of labor mobility are often the best places to establish a Coliving project. It is important to analyze the local demand for flexible housing, access to services and proximity to workplaces or universities. A coliving in a central or well-connected area will be more likely to attract residents and guarantee high occupancy.

‍2. Financial viability analysis

‍Before starting to invest in a coliving project, it is essential to carry out a financial analysis exhaustive. This analysis should include not only the initial costs of acquiring or building the property, but also the recurring operating expenses which come from services contracted with other providers for basic supplies (such as water, electricity or internet, among others), as well as maintenance, cleaning and laundry services, or alarm and insurance systems offered to make residents' stay favorable. The key is to ensure that the operation is profitable in the long term, also considering the expected occupancy rates and the fluctuation of rental prices in the area.

‍3. Legal and Regulatory Considerations

‍Each country or city may have different regulations regarding the rental of shared housing and the use of residential spaces for community activities. It's important to be aware of legal and regulatory considerations to avoid potential sanctions. Some places may have limitations in terms of the number of people that can live together in the same property, or require special permissions to operate a coliving. Having adequate legal and regulatory advice is essential to ensure that the project complies with all current regulations.

Main challenges and risks when investing in Coliving

Although coliving offers multiple opportunities, it also presents challenges and risks that every investor must consider in order to invest in a coliving:

‍Changing regulations

‍The coliving model, although booming, faces regulatory challenges in various parts of the world, both in Spain and in other countries such as Germany or England.

In many regions, this type of housing does not yet have a clear regulatory framework and can create uncertainty for investors. The lack of specific regulations for this type of space in the real estate sector, or the tendency to treat these spaces in a similar way to traditional or tourist rentals, can result in limitations that affect the profitability and viability of projects.

In some cities, local authorities are implementing measures to control the impact of new forms of shared housing on the supply of affordable housing, which may include restrictions on occupancy density, zoning and type of use of buildings. In addition, the growth of coliving could lead to legal revisions that seek to regularize living in mixed-use or short-term spaces, potentially impacting this sector.

Investors should be aware that regulations can change suddenly, especially in areas where authorities are trying to balance innovation in housing with the need to protect tenants.

This adds a level of complexity to the planning of coliving projects, since any regulatory change could influence business models, operational management and profit margins. Investors who thoroughly research the regulatory framework and have legal advice will be able to mitigate this risk and make the most of opportunities in this growing market.

‍High operating costs

‍Although coliving is a profitable investment due to space optimization and high demand, operating costs tend to be higher compared to traditional rentals. This is due to the additional services offered to residents, which are key to the value proposition of coliving, but they also generate a greater economic burden for operators and investors.

These additional services may be due to:

• Cleaning and maintenance services: Unlike conventional rentals, where the maintenance of private areas is the responsibility of the tenant, in coliving the operator is responsible both for the maintenance of common areas (living rooms, shared kitchens, recreational areas, coworking) and, in many cases, for the basic maintenance of private areas (rooms). This involves regular cleaning, whose personnel management can be automated through technological platforms such as cleaning service management software by Doinn, allowing you to worry about cleaning the property.
• Community events and activities: One of the main attractions of coliving is the creation of an active community, which is achieved in part through the organization of social events and activities for residents. These events can include everything from yoga workshops and classes, to community dinners, concerts or conferences, which entail organizational costs when hiring professionals to carry out the different activities.
• Technology and connectivity: Today's coliving is closely linked to technology, as many residents are digital nomads or remote workers who rely on stable connectivity. This means that operators must invest in iHigh-speed Internet, with an infrastructure that provides fast and reliable internet access throughout the building. Especially in coworking spaces, it can be expensive, if coliving is located in areas where telecommunications have high prices. This aspect is closely related to furniture and decoration; another aspect that increases operating costs due to the need to keep spaces attractive and functional. For this reason, many colivings use digital platforms or intelligent management systems to manage spaces, as well as the consumption of basic supplies in the different areas, depending on the access or use made in each of them to measure the use of resources such as electricity or water.

The implementation of these systems has a high initial cost and continuous maintenance, which must be considered within the operating costs.

Fortunately, there are technological solutions such as Polaroo, our basic supply management software, that can help coliving operators to efficiently manage supplies such as internet, water and electricity. With Polaroo, the management of these recurring expenses can be automated through digitized invoices, optimizing contracts with suppliers and ensuring that operating costs are kept under control. By centralizing the administration of services and offering a clear view of consumption, the platform facilitates daily operations, in addition to helping to maximize long-term profitability, allowing investors and operators to focus on the growth of other strategic areas of the business.

‍Occupancy risks and increased competition

‍One of the main challenges when investing in Coliving is maintaining a high occupancy of units, which depends to a large extent on economic factors, the location of the project and market demand.

‍In times of economic crisis, the purchasing power of potential tenants may decrease, affecting the ability of many residents to pay for space in coliving. If the location is not strategic (for example, in areas far from workplaces or with low demand for flexible housing), occupancy rates could be seriously affected.

To this is added the increasing competition in many cities where coliving has become a consolidated trend. Cities such as Berlin, London and New York have seen a significant increase in the number of coliving projects, which could lead to market saturation. The proliferation of new operators, combined with the supply of traditional housing, can dilute demand and reduce occupancy margins for each project.

To mitigate these risks, it is essential to carry out a exhaustive market study and offer a differentiated proposal. Projects that offer personalized experiences, a strong community and key locations, along with flexibility in rental terms, can stand out from the competition and remain attractive to residents, even in a competitive environment.

Example of successful Coliving projects

In the coliving sector, operational efficiency and proper supply management are essential to maintain high levels of profitability and resident satisfaction. At Polaroo, we've been working with successful coliving projects, helping them manage their property's basic supplies with the objective of facilitating the administrative management involved in this type of work at the operational level; reducing management times and saving costs associated with supplies with different suppliers.

An example of this is:

‍Badi, a leading operator in the coliving sector and with a presence in several cities in Spain, it faced the challenge of managing the supplies of numerous real estate assets efficiently. Since the implementation of Polaroo, as an all-in-one platform for managing basic supplies, the Badi team has been able to automate and centralize this process, allowing them to save more than 1,400 hours in administrative tasks and 12,000€ in costs. This has transformed their daily operations, providing them with greater transparency in the management and optimization of supply contracts, and allowing their team to focus on the expansion and development of their business.

This is just one example of how technology and good resource management can be fundamental to improving profitability and competitiveness in the growing Coliving market. If you want to know more about getting the most out of your shared spaces with technology, download our latest guide 'Smart Colivings' and know the strategies to make it possible.