We live in a time of change, disruption. Global forces, such as the growing population, the rising prices of houses, the emerging technologies and the mobile lifestyle of new generations, among others, are irreversibly shaping our cities and how we live.
Global forces shaping the housing market
The housing market of the future will be guided by a purposeful and effective use of the limited space available. Utilising reduced space has become a necessity when designing a new property or repurposing an existing one, as we have seen from the rise of micro housing as a sustainable and affordable method to address the increasing cost of living on a worldwide level.
Moreover, the ratio of the world’s urban population is expected to increase from 55% in 2018 to an astonishing 68% by 2050. It is projected that by 2100, approximately 85% of the population will live in cities. Urbanisation is driven by the relative cheapness of transports, the international patterns of demand and supply of labour and student mobility. Young professionals and students are leaving their native country for a career boost, a better education or to fulfil a personal goal. They combine the necessity to earn money with the desire to see the world and experience new cultures.
The impact of urbanisation has led to complex challenges to address in energy, public safety and most certainly, housing. It has also contributed to widen the gap between income levels and housing prices, resulting in the lowest rate of homeownership measured in recent history, mainly caused by the struggle of younger generations to get on the housing ladder. Furthermore, their willingness to rent a property, rather than owning it, has increased vertiginously in recent times also due to the high demand of flexible lease contracts.
Living in a crowded and dense area does not subsequently imply better social ties. In this fast-paced world, being part of a community is an important element to foster the individual mental health and happiness. Living in a single studio, for example, can be extremely convenient, but at the same time it can lead to loneliness and affect the overall personal wellbeing. Avoiding alienation and this sense of loneliness becomes a key topic to consider while developing any real estate project.
New generations want to be able to focus on work, but also enjoy a rich social life and connect with other peers. They want intimacy when needed and at the same time the possibility to engage with a more globalised personal network and build meaningful connections, especially when living away from home.
The citizens of today are also accustomed to high-quality facilities and to the possibility of having the world available at their fingertips. They are willing to pay a premium price to get better services that simplify their lives, but they are also more money conscious.
With no signs of reversing, the real estate industry has translated the mentioned concepts into developing serviced living solutions, such as Purpose-Built-Student-Accommodation (PBSA), senior housing and coliving. These emerging assets often represent a smart way to address these global trends all at the same time.
Let’s look into student housing and coliving
Finding housing solutions for thousands of students, often characterized by limited budgets and a strong need of communal living, is an historical challenge. Student housing is a concept that existed since the creation of the first universities, but the first big residence hall documented dates back to 1249 in Oxford. The progress of society and the growing demands of students for convenience and privacy made dormitories evolve in order to meet the new need for services. Combining this factor with the societal challenges previously mentioned, real estate developers started offering quality student accommodations in modern university campuses, leading in recent years to the rise of Purpose-Built Student Accommodation (PBSA).
PBSA is a type of private student housing that focuses on providing high-standard private micro apartments or studios combined with shared living spaces. Generally the amenities include shared kitchens, laundry rooms, study areas and 24h security. The newest developments have expanded these facilities to another level. Functions that were not previously considered to be a part of housing, such as gyms or fitness rooms, co-working spaces, cinemas, entertainment rooms and even spas are now being incorporated into the living environment. Additionally, PBSA can include a variety of commercial premises such as convenient stores, cafeterias, restaurants etc.
Having all these areas right next to your studio offers practicality and saves a lot of precious time. Combining this aspect with the ease of living in a high-standard quality accommodation, often with only one all-inclusive bill and close enough to universities and the city centre, PBSA represents a really attractive opportunity for the new generation of students. This is even more true for overseas students that are travelling hundreds of miles to study away from home, often to a country they have never been to. PBSA growth is indeed supported greatly by international students, often from wealthy families, that are looking for prime accommodation, leisure & benefits in central locations.
The modern coliving model disrupting the real estate industry today has originated from the basic premise of student housing. Philip Hillman, Chairman of Alternatives at JLL said about coliving: “It’s the next natural step for student housing and serves the wider private rental market at a time when young and single people are struggling to find suitable accommodation.”
Coliving is indeed similar to PBSA in terms of type of accommodation provided – private studios or small apartments combined with services & amenities – but is different in terms of audience. Coliving mainly addresses young professionals who are seeking for a more convenient, affordable and communal lifestyle. The concept behind coliving relies on the fact that sharing facilities and experiences improves interpersonal interactions, while efficiently using the available space. Sharing parts of your life also impacts positively health and individual wellbeing. Generally coliving tenants have really flexible leases, empowering them to move in and move out whenever they want.
Although coliving is still a relatively niche concept, interest in the sector has grown exponentially since its early beginnings in 2016.
What is next?
Collaborative consumption seems an inevitable process in increasingly overpopulated cities with diminishing resources and the strong demand to build a sense of community.
The newest trend among the emerging real estate segment is a combination between PBSA and coliving that has been denominated Purpose-Built Shared Living (PBSL). A shared living concept is meant both for students and professionals, but it can be translated and extended also to older generations and even to seniors looking for a richer living experience.
The lack of diversified housing supply struggles to meet the changing requirements of millennials and the ageing population. Intergenerational PBSL models blend young and older people to create mutually beneficial relationships, while offering a more affordable & sustainable way of living through a better use of the space and by dividing costs. People from different age groups living together can build a stronger sense of community, enhancing the understanding of one another. This can also alleviate the financial pressures of students while providing companionship and social care to the elders.
Investors indicated that they have assigned €25 billion (US$27.5 billion) into alternative assets around the world in the next five years. The investment would be divided in €12 billion to dedicate to PBSA, €4 billion for coliving spaces and €9 billion for “hybrid” PBSL solutions that are blending student accommodation with other living models.
The complex housing challenges of our modern society demands solutions that are at the same time smart, affordable, technologically advanced, environmentally sustainable and aiming to foster communities & individual wellbeing. It seems that PBSL could help to solve these issues – at least partially – by an effective use of space and the possibility to share hospitality-like facilities and underused assets among tenants.
In our previous article Urban Coliving Movement: Tracing Origins, Generational Influences and the Future of Coliving we already stated that coliving is no longer just for millennials, young professionals and entrepreneurs, but it is also an attractive living option for members of the older generation. PBSL might not be the go-to solution for everybody, but for many it is a chance to live a happier, more sustainable and socially connected life.
Different people, with different lifestyles and personalities, but the same needs of affordability, comfort, sustainable living and community will be the driving force of the PBSL revolution that will be shaping the cities of the future.
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