PL

Co-living the dream

Residential
Co-living is one of those concepts that might be easily understood and embraced by younger generations – such as Millennials and the now coming-of-age Generation Z – but because it’s so new it could be mysterious to those of us who can still remember when Queen were topping the charts

Just like its workplace equivalent, co-working, it could be viewed as an expression of the sharing economy – a shift away from the obsession with ownership and being rooted in one place and, as living space becomes ever more scarce and expensive, towards a cheaper, more footloose and community-centred lifestyle. Unlike co-working, however, co-living has yet to really establish itself in Poland and the CEE region. But as the institutional private rental sector takes off, the first co-living operators have started to take a keen interest in our part of world and are tentatively opening their first buildings here.

First of all, what exactly is co-living? And how does it differ from more traditional private rentals? In simple terms the concept involves providing fully-serviced apartments and community space that is generally shared by students or young professionals. “Co-living is a modern concept that provides shared rental housing with a focus on community sense and a hospitality-led management structure,” explains Maximilian Mendel, the head of living investment at JLL. “It’s a part of the housing sector that caters to the changing needs of city dwellers. Most co-living schemes offer relatively small private rental space per person but provide a wide array of amenities and common areas to be used by everyone living in the building. Although the co-living concept does not exclude certain households or age groups, it is in fact focused on the co-habitation of unrelated people and targets especially the younger generations,” he adds.

Flexibility is their friend

Kamil Kowa, a board member of Savills Poland, agrees that it’s basically “a blend of residential and hospitality,” while stressing that co-living offers “more flexible leases than traditional build-to-rent projects and common, managed space which help in creating community.” But does the demand exist for such contracts? “What we are seeing and surveys are showing is that these are very important factors for Millennials. They care a lot about flexibility – the ability to move between cities and not being tied down by inflexible contracts. This is not provided by the traditional market, where contracts tend to be longer, the apartments are larger, often not affordable. Co-living is a niche product addressed to ‘digital nomads’, graduates, expats and young professionals – who appreciate all-inclusive billing, fully-furnished units, flexible contracts and a sense of community,” claims Kamil Kowa.

What does a typical co-living project look like? “Many co-living schemes provide private self-contained units with an en suite bathroom and kitchen, while in others residents not only share common areas but also units or in some cases even rooms,” says Maximilian Mendel, who goes on: “In any case the focus is on sharing, which is sometimes more pronounced, sometimes less so. Co-living is great for people who want to be in touch with others, e.g. those who don’t want to live alone in a foreign city. It is for those who don’t have a clear vision yet where and with whom and how to live their lives. Also, it’s an option for those who don’t yet want to commit to any long-term financial burden like a mortgage loan.”

Clearly, this product is aimed at the new generation of tech-savvy, often unmarried or single, professionals who are not only not thinking about a mortgage, but value living in a city (and moving from city-to-city or around a city) without all the trouble of paying bills, furnishing a flat, cleaning and any other hassles that might arise. The community aspect is also very important, as Kamil Kowa explains: “One of the main issues co-living addresses for young people, who typically spend as much time online as offline, is the problem of loneliness. Co-living allows them to meet similar people from similar backgrounds. Loneliness is becoming increasingly widespread among Millennials and co-living projects provide spaces and programmes for their residents to interact with others, thanks to such amenities as fitness, yoga, cafés and bars. Ideally, the buildings should be located in or nearby city centres or business districts.”

The first-movers make their moves

In Poland only a few co-living operators have so far entered the market. Indeed, as Kamil Kowa points out: “Co-living is still a new thing on the market – and not just in the CEE region, but also in Western Europe.” The first to offer co-living apartments was Berlin-based Vonder, which opened Vonder UpRiver on ul. Solec close to the Warsaw embankment in early 2020. The 400-apartment building, which offers a range of studio flats, has been steadily more than 95 pct occupied. It also offers a range of amenities, including a fitness and yoga studio, a cinema room, a café, a bar and co-working spaces with conference rooms. Buoyed by the success of its first Warsaw project, this year it has also launched UpTown on ul. Dubois to the north of the city centre, which has 113 apartments, and is planning further openings in the future.

Another Berlin-based company, Medici Living, announced in May 2019 that it was entering Poland with its co-living brand Quarters, stating it was planning to invest 20 pct of its EUR 1 bln budget in partnership with investor Corestate Capital Holding in the country, mainly in co-living projects in Warsaw and Kraków. However, a similar partnership with the W5 Group, which aimed to invest USD 300 mln in entering the US co-living market, seemed to hit the rocks early this year as ten of its American affiliates filed for bankruptcy. Ironically, the company had styled itself as “the WeWork of co-living”.

But the biggest co-living project in Poland so far, also in Warsaw, is Smartti Mokotów YIT, which is to be developed by Finnish company YIT at the junction of ul. Postępu and ul. Domaniewska in the city’s Służewiec business district. Construction work on the first stage, with 280 co-living units, is to start at the end of the summer, which will be followed by 578 flats in the second stage – due to begin in Q4 2021. In June it was announced that Danish real estate investor NREP, which was already active in the Polish logistics sector, had bought this and two other rental apartment projects in the city from YIT. “Following the announcement of the deal with YIT, there should be more announcements in the autumn. We will be focusing on Warsaw to begin with, but should be spreading out to other cities, such as Wrocław and the TriCity, which we are already looking at,” reveals Rune Kock, a partner of NREP who leads the company’s Living business line. As for why NREP is entering this market now: “The demographics are all positive for co-living: people are moving into the cities, so there are more singles who stay single for a longer time who are looking for more convenience – and this is a trend that has been underway for a long time. And Poland is a very interesting market for us, because most apartments are rented out by private individuals. The market is generally less developed than in such places as the UK, but people do seem to be looking for something else. And there are few competitors in this niche at the moment. So there is a fairly large playing field for introducing new concepts and to be the first to do so,” explains Rune Kock.

Outside expertise

Both Vonder and NREP are basing their strategies on a professional brand and the quality of the services they offer. “Companies that provide such branded formats are able to do repetitive developments as well as focus on sustainability and cost-effectiveness. We are able to bring some of our expertise from the Nordics and apply it here,” insists Rune Kock. “What we will mostly be bringing to the Polish market is our recipe – we are setting up our own team, but primarily we will be working with local developers. We see our product as being closer to a hotel, with a range of services – such as cleaning, a gym, a restaurant, a café and with on-site staff who can help you with any problem you might have. You can live a normal life without any of the usual stress. Our concept typically includes both long stays and short stays. And even ultra-short stays of just a day,” he adds.

Happier, not cheaper

Rune Kock prefers to call what NREP offers in this regard as ‘serviced living’ rather than ‘shared living’: “We could still learn a lot from the hotel industry in our field – we’ve been like dinosaurs. We need a new-school approach, where we look at residents as customers. So we need to focus on developing our brand and encouraging them to live with us. Obviously a co-living apartment needs to be a home and the resident needs to identify with it in that way. But greater customer-orientation is required. The questions an operator should ask are: How can we help them? How can we make their stay as good as possible? How can we give them the services they need?” But is such accommodation actually cheaper? “It may sound like a luxury option, but it really isn’t. Larger buildings are more cost-effective. Altogether, the costs are cheaper – but the cost for yourself still depends on what you factor in. We are not trying to be the cheapest operator on the market, but the one that has the happiest customers,” insists Rune Kock. His view is confirmed by Kamil Kowa of Savills: “Co-living can actually be more expensive on a per square metre basis than traditional flats offered in the market, but since the unit sizes in co-living are better adjusted to the structure of the demand and offer additional amenities and services the ultimate cost of living should be lower anyway.”

So far there are no Polish players entering this field on any significant scale. “The co-living players analysing the market are mainly European,” admits Kamil Kowa. As he explains: “We do not have any significant local players yet – but we hope that changes soon as there is a need for that coming from the investors. One of the lessons from the PBSA student halls segment and PRS that applies to co-living is that in order to offer an efficient product you first need to achieve the right scale. You need to plan hundreds or better thousands of beds, for your platform to efficiently offset your central admin, leasing and management costs.” Given that the few international players who have already arrived in Poland seem so confident about the growth prospects for the segment that they are actually putting their money where their mouths are, it would appear that we just have to wait for that critical mass of co-living projects for what is now a tiny niche to take a much more significant slice of the market.

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