The Collective Dreams Big As Co-Living Hits Its Stride
From the outside at least, all was quiet at co-living firm The Collective, and then suddenly, bang, everything was happening at once.
The company’s original 546-bed scheme at Old Oak Common in London spent more than a year on the market but didn’t sell. Then in October it was refinanced by Deutsche Bank at a value above the original asking price.
A few weeks later it announced a move into the U.S., where it is opening a site in Long Island City in September and has two further developments in Brooklyn, one in Chicago. And this month it announced its first project in Miami, a $210M, 12-storey scheme in the city's Wynwood district.
It has expanded into Ireland, with a site purchased for a new scheme in Dublin. It is close to announcing its first site in Berlin.
And next month, in London, it will open its biggest and most ambitious scheme yet, 705 rooms in a 20-storey tower in Canary Wharf.
Altogether it has more than 7,500 units in its pipeline, with a gross development value of more than $3B. The company said it now has a target of a mind-bending 100,00 units by 2025. Overall, it has been a very productive few months for The Collective.
“It just so happened that a lot of things we had been working on for a long time came together at once,” The Collective founder and Chief Executive Reza Merchant told Bisnow on a video call from New York where he was working on the firm’s U.S. expansion.
The Collective’s growth mirrors that of the co-living sector in general. In the past year developer Medici Living has raised $300M to expand in the U.S. and a further €1B to expand in the UK and Europe. Fellow specialist Common has also been expanding in the U.S., and WeWork’s division WeLive has long-standing expansion plans. In the UK new schemes are springing up in London, Birmingham, Manchester and even secondary cities like Wolverhampton.
The Collective is one of the pioneers in the field — its Old Oak Common scheme opened in 2016. The company said it is the largest co-living scheme in the world, though it will be surpassed by the Canary Wharf building when it opens next month.
That 250K SF scheme displays an evolution in how The Collective operates. First, the rooms will be bigger, an average of 180 SF compared to 125 SF at Old Oak Common. Then there is the length of tenure: At Canary Wharf you will be able to stay for as little as one night, compared to a four-month minimum stay at its first facility.
“Our product is always evolving, and we’re responding to the shift in what people want, and that is increasing flexibility,” Merchant said. “At Old Oak Common, 86% of people stay for between nine and 12 months, but the concept of the 12-month lease is becoming increasingly outdated. Yes, it is more difficult if you give people the option to stay for anything from a single night, but our whole model is based on complexity, rather than just doing what’s easy for us.”
The Collective has also hugely increased the amenity offer at Canary Wharf compared to Old Oak Common. As well as the high-end shared kitchens and common areas that are standard in co-living schemes, there will be a spa with facilities like sound baths, meditation rooms and reiki, a pool, a large gym, cinema, music venue and golf simulator.
And it will offer a programme of cultural events that will aim to appeal not just to residents of the scheme but those of the wider location as well.
“We want the site to be publicly accessible and to become a cultural destination for London,” he said. “We are building something for the wider community, not something insular, like most buildings.”
This all sounds very swanky and expensive, so does this counter one of the main selling points of co-living, namely, affordability in the expensive rental markets of major cities? The cheapest room, described on the company’s website as “cosy” is £1,430 a month for a 12-month lease. The area’s average is £1,541 a month for a one-bedroom flat, according to Zoopla.
“Compared to what it costs to rent in Canary Wharf, it is priced at a discount to the local area,” Merchant said.
Its existing site at Old Oak Common, which is 100% occupied, is evolving as well. The Collective is introducing 20K SF of studio space that will be rented at low cost to artists.
“It’s about bringing interesting people together in our spaces,” Merchant said. “It will be a big part of what we are doing in Berlin as well. We want to create environments that are really diverse.”
The company’s U.S. expansion is accelerating, with each scheme being funded individually by different investor groups, with German entrepreneur Jonathan Teklu, an early backer of Airbnb, among its U.S. funders.
Its scheme at The Paper Factory in Long Island City in Queens in New York will eventually total 225 rooms, and will also offer the ability to stay from a single night and will have an extensive cultural programme. The same is true of its scheme at 555 Broadway in Brooklyn, which is scheduled to open in 2022.
Merchant said that while there are cultural differences between the various cities in which it now operates, there is also a major similarity: the sense of isolation that can be created by living in a big city.
“The stereotype would say that Brits are more reserved than Americans, so might not take to co-living, but we are not saying you have to be constantly chatting to people 24/7,” he said. “Everyone has their own space. I have a tendency to be introverted and want my own space. But that cultural programme gives people the option to connect and interact with people who enjoy something they do.
“As cities become bigger, people become increasingly isolated and disconnected. I remember going travelling in 2009 in Thailand, going for a walk down the street, and people smiling at me and saying hello. That doesn’t happen in big cities, but people need that connection.”
And while the flurry of activity of the past nine months might be more coincidence than forward planning, Merchant said he does feel that the real estate industry, and society more generally, is coming round to his way of thinking in its desire for a form of housing that is affordable and fosters community.
“If you’re on a middle income in a big city today, often your only option is to rent a shitty house, often illegally, where the landlord doesn’t care, and that’s just not on,” he said. “Everyone needs a roof, and we think we can meaningfully impact society and what housing can look like.”
The Collective’s dreams are big, and they are starting to turn into reality.