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The Collective Signals Fight Has Begun For UK Regional Co-Living

The Collective's Old Oak co-living development.

Co-living giant The Collective is exploring UK expansion outside its London base, and has Birmingham, Manchester and Leeds in its sights.

The Collective has also signalled a desire to head off potentially unhelpful planning policies now being devised by skeptical local authorities like Manchester City Council

The developer's tiptoe into the regional markets comes as it agrees a new £140M discretionary financing package from Deutsche Bank and GCP Asset Backed Income Fund. The transaction follows Deutsche Bank’s backing of The Collective’s management buyout in 2018 and highlights the emergence of the co-living sector as an institutional asset class.

"We have been really impressed with the innovative and dynamic approaches local governments in cities like Manchester, Leeds and Birmingham are undertaking to both attract inward investment and alleviate the housing crisis,” The Collective Global Planning Director James Penfold told Bisnow.

“Outside of London our growth strategy is currently focused on key urban gateway cities such as Berlin, New York, Dublin and Miami, where we believe the fundamentals of demand vs supply and value which underpin our model are most acute. That said, we do consider new opportunities on a case-by-case basis according to their individual merits, so if the right opportunity came along we would certainly consider it.”

Manchester's city planners recently received a report into co-living's potential in the city that described the sector's capacity to address the city's housing problems as "limited", slated its unaffordable prices, criticised the small size of the units and drew attention to the difficulty of reusing co-living blocks if the concept turns out to be a commercial failure.

“We’d also welcome the opportunity to work with the city regions to help them bring forward robust policies to help successfully manage the growth and sustainability of the co-living sector as we are doing with a number of cities," Penfold said.

The Collective is betting that growing urbanisation, inadequate and constrained housing supply, changing consumer behaviour and increased loneliness amongst urban populations will underpin the growth of a global business.

It owns and operates the world’s leading co-living business, with more than 9,000 units operating or under development and the potential for 20,000 further units under consideration. It is working toward a goal of having a 100,000-unit global portfolio over the next five to 10 years.

The Collective Old Oak, London, is the world’s largest purpose-built co-living building.

The Collective’s new four-year group level financing package comprises a new £120M term loan and a £20M revolving tranche with commitments of £87M from Deutsche Bank, and the immediate re-commitment of £53M from GCP Asset Backed Income Fund following repayment of its previous term loan.

The pipeline of potential sites is “primarily” in the UK, Ireland, U.S. and Germany, The Collective said in a statement.

Founded in London in 2010 by CEO Reza Merchant, The Collective has grown from offering small house shares.