Founded in Brooklyn in 2015, Common Living was an early pioneer of a brand new concept in residential property management: as a substitute of renting out entire units, rooms are rented to individuals. Utilities, WiFi and cleansing costs are bundled into the rent – and the apartments are fully furnished.
Since then, co-living has expanded rapidly within the U.S. and world wide, but Common Living’s journey as a pioneer of the model got here to an unceremonious end late last month. when the corporate announced that it will file for Chapter 7 bankruptcy and liquidate its assets.The company, which operated a portfolio of 5,200 residential units in 12 cities within the United States, now joins an extended list of failed co-living operators, raising questions on the long run viability of the model.
In 2023, Common Living merged with Berlin-based competitor Habyt, making a joint company that operated greater than 30,000 units in greater than a dozen countries. Habyt CEO Luca Bovone said that while Common’s closure was unlucky, the liquidation would make Habyt a profitable company.
“This decision, although not what we had hoped for, will make the rest of the Habyt Group more financially flexible and give it greater capacity to accelerate growth and create value,” said Bovone. told Bisnowa site with news in regards to the business real estate sector.
Thousands of Commons units shall be taken over by Outpost Club, one other giant of this model that already operates around 1,500 units in 40 buildings in New York City. Sergii Starostin, the corporate’s CEO, said Assets They had taken over the management of seven properties before the bankruptcy and Outpost was targeting 50% of Common’s holdings.
While many co-living firms went out of business in the course of the pandemic, Common has been aggressively expanding its portfolio and raising funds. Between 2020 and 2022, the corporate acquired around 5,000 units and by 2023, it had greater than $110 million in enterprise capital. In an interview with The New York TimesHowever, company founder Brad Hargreaves declined to comment on whether Common was profitable or not.
Outpost Club’s Starostin said he believes the huge money injections that enabled Common could have actually contributed to the corporate’s financial woes, because the investments propelled the corporate to rapid expansion in markets equivalent to Nashville, Ottawa and Chicago.
“The community needs to grow very quickly in many places,” said Starostin. Assetsand explains that taking over a single property in a brand new market requires constructing a complete latest staff and marketing effort. “And when you multiply that by 20… it becomes a pretty expensive endeavor. In my opinion, it just takes more time to scale this type of business.”
Habyt CEO Luca Bovone said Bloomberg that Common’s insolvency was related to the corporate’s contracts and transactions in addition to increased rate of interest pressure.
This is just not the primary time that Outpost has managed the contracts of a former competitor. It took over a number of the Bedlys subleases in Manhattan and New Jersey when the corporate closed in 2019, and the identical happened when the German company Quarters Bankruptcy filed in 2021.
Like Common, Quarters also failed despite successfully raising enterprise capital. The Medici Living Group raised $300 million for its German subsidiary to expand into the USA in 2019.
“Venture capital doesn’t work very well in real estate because we see the requirement to grow fairly quickly in 10 or 15 different markets,” Starostin said. “So I think these companies failed because they were required to grow too quickly in many different markets, and that’s very difficult to do in real estate.”
Clara Arroyave is CEO of Co-Living Cashflow, a platform for purchasing, selling and investing in shared housing. While she was upset by the news about Common earlier this month, she also said it was not surprising given the extent of investment that has gone into the corporate’s expansion.
“When you raise venture capital, you’re under pressure to grow and deliver results very quickly,” says Arroyave, who founded and ran a co-living company in Boston. before it closed its business in the course of the pandemic. “And often you’re pushed to expand the number of rooms, the demand or the market, and you keep growing without being profitable or having very high overhead costs.”
Unlike other outstanding competitors who failed, Starostin said Assets that Outpost has decided to focus its operations and expansion plans on New York, where the corporate already has a staff and marketing network.
The pandemic was a severe test for the model, and a number of the largest operators were forced to shut as many potential tenants moved away from close quarters with strangers. When Quarters went bust, the corporate operated around 3,000 units and was within the technique of developing 1,500 more. 2021 also saw the demise of WeLive, the co-living offshoot of WeWork, and The Collective, a UK-based company that had nearly 100,000 units in its portfolio when it went bankrupt.
In addition to the pandemic, expansion issues and high rates of interest, co-living firms are also scuffling with problems specific to their still relatively latest approach to housing. Many firms advertise themselves less as traditional landlords and more as platforms that connect individuals with available rooms. Potential renters haven’t got to fret about finding roommates for a whole unit or a year-long lease. Rooms are rented individually and other people often only stay for a number of months. But the somewhat flexible, low-key approach has caused problems in some cases.
In 2022 The Daily Beast reported that some tenants at Common Living properties had complained to the corporate about questions of safety, poor maintenance and potentially dangerous residents. One tenant posted in an apartment group chat that he desired to set the constructing on fire – but residents quoted within the article reported that Common’s response team did not communicate or handle situations appropriately or in a timely manner.
And despite the closure of Common and other competitors, Arroyave of Co-Living Cashflow and Starostin of Outpost Club consider the business model is here to remain. While progress has been slow, the flexibleness and easy accessibility to housing which might be on the core of the co-living idea are greater than in demand amongst young renters.
“Young people can’t afford rent, and the basic conditions for housing – in New York, in Boston, in LA – aren’t going to change dramatically any time soon,” Arroyave said. “But for coliving to remain successful, the question is what part of the business model isn’t working.”
“The movement is already there,” Starostin said. “I don’t think it will change. It’s just a question of who will grow in this market, but the market itself is there.”
