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German Co-Living Brand Readies Major U.S. Expansion

After opening its first U.S. co-living location in Manhattan earlier this year, Medici Living Group is gearing up for a major expansion in 2018 as the niche housing type grows in prominence.

Medici Living Group co-founder and Managing Director Evan Kasper

Medici plans to open one of the country's largest co-living spaces in one of the country's biggest cities in 2018. It is just one of many Quarters locations coming to market in the coming years. The Quarters brand is fashioned for the U.S. compared to the sparser Medici Living flat-sharing locations it has operated for years in its native Germany and across Europe. 

Medici co-founder and Managing Director Evan Kasper said Quarters' first location, on Grand Street in Manhattan's Lower East Side, filled up within 30 days after opening in April, and the experience running that facility has primed it for major growth next year: in addition to a 180-bed development being built ground-up in an undisclosed U.S. location, Medici plans to open a handful of new Quarters in New York City in 2018.

"Quarters is supposed to be a globally connected product where if you live in one building, you are connected to the community all across the world," Kasper said. "To do that, you need a critical mass. The vision, that model, works at scale, and it’s something that needs to be created almost all at once to really work well."

A room in the Lower East Side Quarters, Medici Living's first co-living location in the U.S.

Medici operates 70 locations across Europe, and it opened a Quarters brand in Berlin this spring, a month after it launched its Grand Street building. It already has hundreds of employees and a built-out infrastructure, differentiating it from U.S. co-living startups like Common and Ollie that are opening their first handful of locations. 

While the smaller competition — still raising money and opening locations quickly in New York, San Francisco and D.C. — is also looking at growing to meet their extensive waitlists, Quarters can build up scale faster, and plans to. Kasper said he has "looked in just about every Tier 1 or Tier 2 market," and said the time is finally right for mass growth in the still-niche co-working industry.

"Co-living is going to transform from a brownstone experiment into an asset class," Kasper said. "2018 will mark the beginning of institutional-level quality products coming online."

Quarters' upcoming 180-unit project, which Kasper said would become public soon, would be the third-biggest facility in the U.S. In Long Island City, Queens, Ollie expects to open the country's largest co-living facility yet early next year, with 426 beds across 14 floors in a 43-story mixed-use development. Common has expanded to 15 locations nationwide, with more coming for next year.

The giant that looms over the nascent industry is WeWork, which is opening its third WeLive facility in Seattle, a ground-up development that will have 23 stories of co-working in a 36-story tower that will also house a traditional WeWork, retail and other uses.

With plans to open in 2020, Seattle's WeLive is the second-biggest co-working building to have been announced so far, but, at the rate the industry is moving, it may well be surpassed by the time it opens its doors.

WeLive opened two locations in 2016, then went dormant as it leased up those spaces, scuttling previously announced expansion plans. Its re-emergence in Seattle, paired with the hiring of James Woods to lead WeLive, has been among the market signals that Kasper said point to a major co-living boom next year.

"[WeWork] had the means to spread the concept across to media and across the U.S.," Kasper said. "There’s a large reason we got involved, because we have such a substantial platform already built out, and it’s clear that the marketplace is now ready for this."

The roofdeck at Quarters' Lower East Side location

After months of operating what was essentially a pilot location, Kasper said his team gained a strong grasp of the nuances between operating flat-sharing in Europe and catering to the millennial-friendly ethos of authenticity co-living needs to succeed.

"Since April, we’ve learned that the customer views the experience, the roommate-sharing, the furniture and the building all as a representation of you and your product," Kasper said. "We’ve learned that when you scale, you’re going to have different types of buildings, locations, customers, but you really have to work hard to keep the experience consistent and customer-centric."

Kasper made note of the recent controversy around Common's biggest property, Common Baltic in Brooklyn's Boerum Hill neighborhood, which had reportedly failed to return security deposits to several of its residents after they had moved out. Common leases the building from owner Adam America Real Estate, and it had been the real estate company's job to return the deposits. 

Fault aside, issues like that reflect on co-living companies, which largely partner with traditional real estate companies that own the buildings, and Common or Ollie function as a property manager. But their entire brands are built on the idea that they, and the spaces they operate, are more than just a rental apartment.

"Think about how the average landlord deals with a tenant, they’re almost a bother. Co-living, we’re taking the shared economy, experience and demand and layering it on top of real estate, so it’s transforming tenants into customers," Kasper said. "And the tenants become brand ambassadors, you want them renewing, staying and remaining in your ecosystem."

The loyalty and buzz Quarters and its counterparts hope to maintain has attracted the real estate industry at multiple levels. Many of Common and Ollie's investors are traditional real estate landlords, and institutional investors see them as a way to differentiate otherwise commodity-level investments in some of the country's most attractive real estate markets.

"Just from my own conversations from developers, banks, institutions around the U.S., everyone is paying attention and people are getting involved," Kasper said. "It’s really cool to see the perspective shift. I remember in January 2016, you would have to explain what co-living was and try to compare it to co-working. Now it’s just understood, and you talk about your competitive advantage."

Medici's advantage lies in its infrastructure and experience. Now that it has developed processes to adjust to the American economy — including new leasing forms and applications, dot-com websites and its online leasing portal — Quarters is ready for prime time.

Listen to Kasper and other multifamily innovators at Bisnow's NYC Residence of the Future event Wednesday, Nov. 29, at Convene in Midtown Manhattan at 7:30 a.m.