BTR's Big Reset: U.S. Operator Common Aims To Disrupt UK Market
Common, the New York-based co-living operator, will debut in the UK in spring 2022, promising 3,000 apartments by 2023.
Common will open its account with four schemes in London, totalling 664 units over five sites in Wandsworth and Westminster. This follows deals with owners London Green and SAV Group.
The announcement represents a boost for the nascent co-living sector, which was bruised by last month’s collapse into administration of The Collective, the UK’s largest indigenous operator.
Yet Common’s arrival promises a disruption that goes far beyond co-living and extends to the entire UK build-to-rent residential market. It will bring to the UK a third-party operator business model that allows for super-rapid scaling up, the prospect of importing into the UK a U.S. mix of co-living and standard BTR, a new emphasis on 'micro' apartments, and a powerful consumer-focused brand.
Here’s what to look out for.
1. Rapid Growth
Since the beginning of 2020, Common has more than tripled its portfolio in the U.S. It plans something similar in the UK.
The aim is to grow fast, thanks to a lightweight business model with relatively low upfront capital requirements. It makes for a stark contrast with The Collective, where the debt burden from owning assets ultimately became unbearable.
“We are structured as a design firm and a third-party management company, and the reason for that is the third-party structure enables us to scale up quickly, and work with a wide variety of owners and developers. We’re not developing ourselves,” Common founder and Chief Executive Brad Hargreaves told Bisnow.
“That means that as a third party, some of what we’re doing is client driven," he added, the clients being landlords and developers. "Our role is to identify great developers and owners who want a new level of professional management. Obviously some of this is on us too — it is about when we want to put our stake in the ground in new cities and markets. But yes, we do it with partners.”
The first London schemes are based on repurposing existing developments. Talks with potential landlord and developer partners in Dublin, Manchester, Edinburgh, Glasgow and Bristol are also underway, led by London-based Managing Director of Real Estate Brian Lee.
Make no mistake, the fleet-of-foot business model means growth can be rapid. The first announcements about out-of-London schemes are expected by spring 2022.
In the U.S., Common has more than 22,000 signed units under development in 28 cities. It has acquired management agreements from its biggest competitor Starcity, announced expansions in Philadelphia and LA, and raised $50M in its Series D venture capital funding round from venture capital firm Kinnevik.
2. Studios And Micro-Units
So far, the co-living sector in the UK has focused on rooms in shared apartment blocks with only a handful of developers offering studios clustered around shared amenities, such as Birmingham-based Woodbourne Group.
Yet in the U.S. the studio-based form of co-living is well established, and known as micro-units or micros. Common plans studios for its first London schemes, figuring that studios are more familiar to planners and potential residents.
Typically a Common room is 100 SF to 190 SF, and a studio/micro is 110 SF to 380 SF.
“We see micros and BTR as kind of indistinguishable because we see developers offering BTR apartments of 650 SF, and in some markets like Texas, frankly that is a micro already in that specific market,” Hargreaves said.
“Both studios and individual room shares have a role — and we manage both — but in London we’re working on micros, because it is a more established model in the UK. But I believe there is room for shares as well. We’ve seen data that suggests 70% of all leases signed in London are for unrelated people sharing, so clearly there’s a lot of people already living with roommates. The next step is for that market to be institutionalised and professionalised.”
Common could face planning complexities outside London, where local rules do not make separate provision for co-living, but where micros might be more acceptable to local councils.
3. Mixing It Up
Until now co-living in the UK has generally operated as a separate business, unconnected to wider BTR initiatives, and invariably in separate buildings. Common plans to mix them up.
“We’ve seen a lot of success in the U.S. with co-living and normal BTR co-existing in the same buildings," Hargreaves said. "It works because renters get the ability to get into a great building and a great neighbourhood for a lower rent — by having co-living in the building’s mix you insert a lower rung on the property ladder.
“That makes a lot of sense for building owners, because you get to appeal to a different, wider audience, an audience maybe the building next door is not reaching. And you also get the prospect of residents moving up the ladder within the building. We see a lot of fluidity between co-living and BTR, as residents decide to upgrade. We also sometimes get movement back down to co-living from BTR as relationships split up.
“Clearly a lot is changing very quickly in UK BTR, and co-living is obviously new. In the U.S. co-living and BTR are highly integrated and many schemes have both. In the UK they remain distinct for planning reasons, but we intend to mix co-living with BTR, and I think that could see us delivering a pipeline measured in thousands each year.”
In the U.S., Common has no hesitations about promoting a brand that generates 40,000 consumer leads a month. The firm said this unique demand from young professionals positions Common to become one of the largest property managers in the UK.
The U.S. operation promotes the brand as safe, reliable and community-driven property management.
“Prioritizing technology, Common will bring a renter-first living solution with innovative apartment typologies not commonly found in the UK,” the company said in a statement.
The mix includes neighbourhood-focused events like wellness programs and cooking classes in addition to discounts to national brands and services. In the U.S., 65% of members attend Common’s off-site events designed to create connections between residents and activate the local business community, the company said.