Can co-living help ease the tight housing situation in urban centres? Debate has swirled around this topic in Germany in recent months, but it is a long-established fact that apartments are hard to come by in economically successful German cities.

That can make life hard, especially for well-educated professionals. They frequently change jobs and locations at short notice and are also are expected to be flexible and mobile. Many are drawn to city life for its own rewards, too – including career opportunities in innovative industries. To take advantage of these opportunities, though, they need a place to live. Quickly being able to move into a new place, without excessive logistical effort is a decisive location benefit not only for the much-vaunted digital nomads.

Co-living services are still quite new. In Europe, the number of beds (a yardstick that established itself due to similarities with the hotel industry) in mid-2019 amounted to around 23,000, either already in use or under development. This is small compared to the overall housing market, but the segment is growing at a breathtaking pace. 60 percent of these projects have emerged in the past two years alone, as the JLL European Coliving Index shows. The segment is clearly expanding rapidly, led by London and Amsterdam. However, co-living has also picked up considerably in Berlin and Hamburg, which now account for around 5 percent of European co-living offerings and developments.

“Co-living presents housing investors with an attractive opportunity to add new risk-return profiles to their portfolios. The economic argument for co-living is that it combines high square meter rents with moderate absolute rents and allows rapid rent adjustments due to the relatively short leases – albeit at the cost of a generally higher vacancy risk,” explains Kortmann.

The success of co-living will largely depend on how well it is tailored to each property. And on housing trends in cities in general. In the end, long-run demand will determine the model’s economic viability. Given the ongoing trend toward urbanization and the high likelihood of persistent housing scarcity, it seems likely that demand will be stable.