The UK shared living sector is seeing rapid growth as investor interest grows

Knight Frank, a global real estate consultancy, has published its Co-Living Report 2024, revealing significant growth and investment in the co-living sector in the UK.

The sector has seen rapid growth in recent years, with the number of new beds delivered in 2023 up 65% on the previous year, the report found. This brings the total number of operational shared homes in the UK to 7,540, a five-fold increase since 2019. However, despite this rapid expansion, current deliveries represent just 0.4% of the potential addressable market, underlining the huge scale of the opportunity for developers, investors and lenders in the sector.

Investor appetite for co-living is strong, with almost £1bn spent on acquiring or funding projects since 2020. This trend is set to continue, according to the latest Knight Frank UK Living Sectors Survey, which gathered the views of leading institutional investors who currently hold more than £75bn in UK housing sector assets; 45% plan to invest in co-living by 2028, compared with 32% who have already invested.

“The potential market for shared housing includes 1.7 million people currently renting shared housing in urban centres across the UK. The growth trajectory of the shared housing sector has been impressive, with a five-fold increase in the number of completed homes since 2019.

“This rapid expansion in supply reflects the growing maturity of the sector and its ability to meet changing housing needs. As larger schemes come to market and institutional investment increases, shared housing is cementing its position as a key part of the wider UK rental landscape. The macroeconomic factors for the sector are well documented and have supported the sector’s growth in recent years.

“These include a clear and widening supply-demand imbalance in cities and towns across the country, growing populations, urbanisation, falling household sizes and changing consumer attitudes. Affordability constraints for potential first-time buyers have also increased demand for good quality rental housing and supported rent growth.”

Oliver Knight, Head of Residential Development Research, Knight Frank

The report reveals that the sector has a diverse demographic, with 72% of current residents aged between 26 and 40, showing that young professionals are renting in the sector – not just students or recent graduates. The largest proportion of residents (35%) are aged between 31 and 35, further highlighting the diversity of the sector.

Looking ahead, Knight Frank expects the supply of shared accommodation to almost triple to over 20,000 beds over the next three years, based on the current development plan. The report highlights the key trends shaping the shared accommodation sector.

“The surge in institutional interest in co-living is a clear indicator of the potential of this sector. As more investors see value in the co-living proposition, we expect to see continued growth and innovation in this space, particularly in urban centers where demand for housing remains high.”

Oliver Heywood, Partner, Residential Investments, Knight Frank

While London dominates with 74% of total co-living investment, the pipeline is expanding into other markets. Manchester, Liverpool, Sheffield and Birmingham are the leaders in regional cities, with large and growing populations of young professionals, high graduate retention rates and expanding employment markets.

It also found that the sector offers a more affordable option for private renters. In London, rents for shared accommodation are targeted at a 7% discount compared to the overall cost of living in other private rented accommodation and a 14% discount compared to multi-occupancy homes.

“From a valuation perspective, we see growing confidence in the co-living sector among lenders. This is supported by solid fundamentals such as high occupancy rates, higher rental yields compared to traditional residential assets and the sector’s resilience to economic fluctuations.

“The rapid occupancy rates we have seen, often averaging four beds per day in some projects, coupled with high tenant satisfaction rates, give lenders the certainty they need to support these projects.”

Ewa Scott, Associate in the Residential Investments Team, Knight Frank