The sector has emerged as a timely solution within the wider rental market, with Savills reporting a 43% increase in rents across London and the UK’s ‘Big Six’ cities over the last three years. This has been driven by a 15% reduction in rental stock compared to 2019, accelerated by smaller buy-to-let landlords leaving the sector. In London, PRS stock contracted by 3.5% between 2021 and 2023, marking the first decline in decades and highlighting the need for more housing, and innovative solutions.

Savills analysis shows that all-inclusive Co-Living opening rents in London range from £1,550 to £1,750 per month in a sample of 11 operational schemes with over 2,700 units. These rents are comparable to a room in a house share in areas such as Hackney, Hammersmith & Fulham, or Vauxhall (SW8), and so offer an attractive alternative for those wanting their own living space, of a higher quality, combined with a range of amenity and social opportunities. These rents are also comparable to one-bedroom flats in areas like Croydon or Beckenham, after factoring in bills, which are often included in Co-living, providing the added benefit of convenience.

Savills research also shows that cities with strong graduate retention rates, such as London, Manchester and Birmingham, are key markets for Co-living developments. London leads the way with a 59% graduate retention rate and a total of 158,000 graduates entering the workforce annually. Many graduates, who are familiar with high-quality purpose-built student accommodation (PBSA) from during their studies, seek similar options as they begin their careers, particularly if relocating to a new city.

While construction has faced challenges due to market conditions, falling inflation and building costs,  there is an increasing pipeline which will drive future delivery. 5,500 Co-Living units are currently under construction, in addition to the 9,000 that are already operational. Across London, 23 boroughs have adopted or are developing policies on Co-Living. While some have introduced restrictions, the majority remain supportive of new schemes, presenting opportunities for further growth in the capital as well as paving the way for secondary cities.

Paul Wellman, associate director, residential research at Savills, said: “Co-Living is emerging as a vital addition to the UK’s rental landscape. With rising rental costs and a shrinking PRS, co-living offers a practical, high-quality housing option that delivers value for money while addressing the evolving needs of city renters.”

Lizzie Beagley, head of PBSA and co-living transactions, Savills operational capital markets, added: “As the BTR market continues to grow, now with 106,000 operational Multifamily homes, Co-living is emerging as a distinct sub-sector within the wider institutional market. It has attracted interest from investors such as Cain International, Blackrock, Real Star, Crosstree, DTZIM, APG and CDL. The transactional evidence is still sparse due to our still being in the development cycle of the market. However, we are seeing success from established operational portfolios such as DTZIM (Folk), Dandi, Vita (Union) and Scape (Morro) in some excellent second-generation Co-Living schemes, which will no doubt continue to strengthen broader investor confidence.”