Co-living describes a shared residential living format that provides residents with private rooms and access to shared amenities. This includes housekeeping, maintenance, wifi, community events and membership benefits. Its primary aim is to promote community and it can be suitable for short (up to six months) and long-term stays.

JLL Research estimates Australia’s co-living market comprises approximately 2,334 operational beds of which 991 would be considered under the most institutional definition of co-living based on their scale of more than 100 beds.

Local private developers and global investment managers with overseas exposure to the sector are dominating. Some large institutional groups are also in the mix, with acquisitions being made as part of value-add (improving the property to capture returns) and core-plus (greater risk, greater potential return) investment strategies.

In early 2024, Sydney-based private developer Freecity purchased an ageing apartment building in Macquarie Park, Sydney, for A$73m, submitting plans for 505-room co-living accommodation including cinemas, meeting and function rooms, a gym and a pool.

In February 2023, Australian co-living operator UKO settled on a A$14,700,000 purchase of a 33-bed asset in the Sydney suburb of Glebe, achieving a capitalisation rate of 4.6%. The property’s rate per room (the value of the property divided by the number of rooms – a metric used to compare assets) was set at A$445,445.

And in April, a co-living development in the Sydney suburb of Surry Hills was purchased by a private investor for A$15.5m. The freehold development comprising 32 self-contained studio apartments and ground floor retail sold at a yield of 5%. Globally, recorded yields have been between 4.50% and 5.50% as of Q2 2024, according to JLL.

Co-living operators are benefiting from a rental market that has been tightening in Australia since 2022, with high occupancy levels across many of their assets,” says Dylan McEvoy, joint head of metropolitan sales and investments, NSW. “We’re likely to see further stock as managers seek to expand their portfolios of operational living assets.”

Because the Australian sector is fledgling, investors are looking to more mature markets for pricing and growth potential. 

Co-living is a sub-sector of the broader living sector, including built-to-rent and purpose-built student accommodation (PBSA) both of which have benefitted from increasing investor interest over the past couple of years.

However, plans to slow down student migration into Australia in 2025 may create temporary headwinds for the PBSA sector. In build-to-rent, impending tax changes combined with rising bond yields pushing up required returns is tempering investment. JLL expects both factors to drive investment further into co-living.

Australia’s economic strength is a major attraction for investors. Increased net migration, robust private and public investment and strong commodity exports continue to drive growth, with Australia expected to outperform other mature economies with a projected growth rate of 2.6%.

“Long-term market fundamentals including migration growth, historically low rental vacancy and an underlying supply demand imbalance for good quality housing are all supportive of further investment into co-living, drawing on learnings from more established markets abroad,” says Jack Bergin, head of living – capital markets, JLL.