The Herman Trend Alert

November 6, 2019

Exponential Growth for Co-Living and "Glosteling"

There is a worldwide movement that many of us had no idea even existed. Not surprisingly, the Shared Economy has supported organizations like AirBnB and HomeAway. However, we were surprised to learn that due to rising costs and shortages of independent lodging in urban areas, there is a strong and growing trend towards what is called "Co-Living." While communal living has been with us in Israel, Morocco, and a few other places on the planet, this appearance of shared living spaces seems to be somewhat different---in its scope and profitability.

Co-Living is Becoming Big Business

With tens of thousands of beds in many major cities, including Amsterdam, New York, Bengaluru, and San Francisco, this emerging industry is growing very fast. Companies like The Embassy Network, which now has official houses in the United States, Costa Rica, Haiti, and Greece, is adding shared homes quickly. Clearly, the country in which this trend is growing most rapidly is India, where the market represents 12 Billion USD in revenue. Tens of thousands of beds in facilities owned by Co Live Beds, Stay Abode, and Stanza Living are already available to young working people and many more are planned for the future. Also big global commercial players like WeWork's subsidiary WeLive, Oyo Live, and Common are being joined by traditional property developers.

The Current Target Market is Millennials

The marketplace of Millennials is generally defined as people born between 1981 and 1996. These young professionals, often college graduates, increasingly find the local apartment rental market in the major global cities is beyond their means. Enter co-living opportunities to meet these market needs. And the amenities are very appealing; co-living buildings offer generous common spaces, like lounges, gyms, and hot tubs, as well as hotel-style amenities, including free Wi-Fi, utilities, and housekeeping.

Other Non-Millennial Co-Living Properties

The previous reluctance on the part of apartment owners has now mostly disappeared. Now that investors really understand the opportunity, investment money is flowing and plans are in process to offer co-living spaces for others as well, including attractive amenities like weekly housecleaning, grocery delivery, and dry-cleaning pickup, not to mention access to a gym and a rooftop area. Plus, earlier this year, Common, announced a new venture called Kin in partnership with one of New York's biggest developers. Together, they will create co-living spaces for young families with shared playrooms, places to park strollers, and other community areas for children and their caregivers.

Dedicated to Making the World a Better Place

Whether they are tutoring kids at a nearby school in San Francisco with high rates of poverty and homelessness or organizing an informal gaming group with local ex-convicts, the opportunity to live a more purposeful life is clearly important to Millennials. Many co-living spaces actually include this attitude in their Mission Statements.

From Co-Living Spaces to Glosteling

Some properties including Embassy SF, and the other houses in their Network, offer visitors onsite hostels. Hence the term I coined, "glosteling" or "glamorous hosteling." That SF property has room for as many as 10 guests in unused bedrooms. While contributing to running expenses, the hostel component creates opportunities for the residents to meet new people. Everyone does his or her part to check in guests and keep the house clean and running smoothly; and interestingly, no one locks their doors.

Forecast for Co-Living and Glosteling

Among the small hotel chains getting into the act is LemonTree which, partnering with the mega investment firm Warburg Pincus, has already recognized the business opportunity that co-living and glosteling presents. Expect to see the major hotel chains capitalize on this trend with new divisions.

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Read this Herman Trend Alert on the web: http://www.hermangroup.com/alert/archive 11-6-2019.html.

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