Common Living, founded in Brooklyn in 2015, was one of the first companies to pioneer a new venture in residential property management: Instead of renting entire units, rooms would be rented to individuals. Utility, Wi-Fi and cleaning costs will be bundled with the rent, and apartments will be fully furnished.
Since then, co-living has exploded across the US and the world, but Common Living's journey as a pioneer of the model unceremoniously ended late last month When the company announced it was filing for Chapter 7 bankruptcy protection and liquidating its assets. The company, which managed a US portfolio of 5,200 units across 12 cities, now joins a growing list of co-living operators that have caught fire, leaving questions about the viability of the model going forward.
In 2023, Common Living merged with Berlin-based competitor Habyt, creating a combined entity that operated more than 30,000 units in more than a dozen countries. Although Common's closure was unfortunate, its liquidation would make Habyt a profitable company, said Luca Buffon, Habyt's CEO.
“This decision, although not what we had hoped for, will make the rest of the Habit Group more financially resilient, with greater ability to accelerate growth and generate value,” Buffon said. Tell Bisnoa site dedicated to commercial real estate news.
Thousands of Common's units will be taken over by the Outpost Club, another giant in the model that already operates about 1,500 units across 40 buildings in New York City. said Sergei Starostin, CEO of the company luck They took over management of seven properties before filing for bankruptcy, and this outpost was targeting 50% of Common's stock.
While many co-living companies have gone out of business during the pandemic, Common has been aggressively expanding its portfolio and raising funding. It acquired about 5,000 units between 2020 and 2022, and by 2023 it had collected more than $110 million in venture capital. However, in an interview with the The New York TimesCompany founder Brad Hargreaves declined to comment on whether Common is profitable.
The Outpost Club's Starostin said he believes the massive funding that fueled Common may have actually contributed to its financial woes, as investments have pushed the company to expand at a rapid pace in markets such as Nashville, Ottawa and Chicago.
“In many places, vulgaris should grow very quickly,” Starostin said. luckExplaining that choosing one property in a new market requires creating an entirely new staff and marketing process. “And when you multiply that by 20… the journey becomes very expensive. My opinion is that it takes more time to scale this type of business.”
said Luca Buffone, CEO of Habyt Bloomberg Common's bankruptcy was related to the company's contracts and business, as well as increasing pressure on interest rates.
This is not the first time Outpost has stepped in to manage the contracts of a former competitor. And grab some Bedly Sublease Agreements In Manhattan and New Jersey when the company closed its doors in 2019, and did the same when the German company Quarters closed. It declared bankruptcy in 2021.
Like Common, Quarters failed despite successfully raising venture capital. Medici living collection It raised $300 million for its German subsidiary Expanding to the US in 2019.
“Venture capital doesn't work well with real estate, because we see demand growing in about 10 or 15 different markets very quickly,” Starostin said. “So I think those companies failed because they were asked to grow too quickly in too many different markets, and that is very difficult in real estate.”
Clara Arroyave is the CEO of Co-Living Cashflow, a platform for buying, selling and investing in co-living properties. While she said she was upset by the news about Common earlier this month, she also said it was not surprising given the amount of investment being made in the company's expansion.
“When you're raising venture capital, you're under pressure to grow and deliver very quickly,” said Arroyave, who founded and ran a co-living company in Boston. Before he goes out of work During the epidemic. “Often you are pushed to expand the number of rooms, demand or market, and you continue to grow without profitability or have a very high overhead cost.”
Starostin said that unlike other high-profile competitors who caught fire luck Outpost chose to focus its operations — and expansion plans — in New York, where it had already established employees and marketing networks.
The pandemic has been a serious test of that model, and some of its largest operators have closed their doors as many potential renters turn away from close living arrangements with strangers. When Quarters went under, it operated about 3,000 units and was developing another 1,500. 2021 also saw the demise of WeLive, the co-living subsidiary of WeWork, and The Collective, a UK-based company that had nearly 100,000 units in its portfolio when it filed for bankruptcy.
Beyond the pandemic, expansion issues, and rising interest rates, co-living companies have to confront more specific problems in their still relatively new approach to housing. Many companies advertise themselves less as traditional landlords, and more as platforms to connect people with available rooms. Prospective renters don't have to worry about finding roommates to slot into an entire unit or a year-long lease. Rooms are rented individually, and people often stay for only a few months. But the somewhat flexible and hands-off approach has led to problems in some cases.
In 2022, the Daily Beast mentioned Some tenants of Common Living properties have complained to the company about security issues, poor maintenance, and potentially dangerous residents living on site. One tenant posted in an apartment group chat that he was going to set the building on fire — but residents quoted in the article reported that Common's response team failed to communicate or handle the situations in an appropriate or timely manner.
However, despite the closure of Common and other competitors, Arroyave of Co-Living Cashflow and Starostin of Outpost Club said they believe the business model is here to stay. Although progress is spotty, the flexibility and accessibility of housing at the core of the idea of co-living is something for which there is sufficient demand among young renters.
“Young people can't afford rent, and the basics of housing — in New York, in Boston, in Los Angeles — the numbers are not going to change dramatically anytime soon,” Arroyave said. “But for coloring to remain strong, the question is, what part of the business model is not working?”
“The movement is already there,” Starostin said. “I don't think it's going anywhere. It's just a question of who will grow in that market, but the market itself is there.”