Poland’s nascent co-living sector is set to soon see more growth. A number of new projects are now in the pipeline as young people’s living preferences and investors’ appetites change BY ADAM ZDRODOWSKI
The Medici Living Group, a provider of co-living space in Europe and the US which currently operates around 2,000 rooms, is planning expansion into Poland. The company has recently appointed a new director responsible for the roll-out of its Quarters brand in the country. The operator wants to add at least 7,300 rooms to its portfolio by 2023. “On our journey to become the WeWork of co-living over the coming years, establishing a foothold in Poland is another key step,” said its founder and CEO, Günther Schmidt.
He added that co-living is becoming more of a pull for the younger generation of Poles. “We are meeting their demand for flexible and, at the same time, affordable housing in large cities with our Quarters concept,” Schmidt argued. The Medici Living Group and Corestate Capital Holding last year launched a €1 billion European co-living program, with up to 20 percent of the sum to be invested in Poland. The initial focus is on Warsaw and Kraków, with other large Polish cities to be considered later on.
Co-living has become increasingly popular globally in recent years, in particular in the US and in the UK. Although individual projects can vary a lot, the idea most often boils down to renting a micro-apartment in a building that also offers high-quality common areas. Experts sometimes describe co-living as buying residential service, rather than buying residential space. Clients get access to facilities such as silent rooms, reading rooms and dining rooms, as well as gyms as other recreational spaces.
In this sense, co-living projects resemble modern private dormitories, but they are mainly targeted at millennial employees. They are also a bit like hotels in that staff take care of the common areas and you can order cleaning and laundry services. The idea of co-living can be traced back to the broader idea of a shared economy and has much to do with co-working. Indeed, some co-living schemes operating abroad attract people working on joint projects. Some offer membership and access to several co-living locations.
Co-living projects are predominantly developed with young people in mind, with those who have just finished their studies and are starting their professional careers, said Maximilian Mendel, head of living investment at JLL. He added that such projects tend to be chosen by people who do not yet know where and with whom they will live in the future, as well as by those who, due to their limited financial resources, do not want to make a major financial commitment.
The pool of potential clients has been growing globally, and Poland is no exception. Co-living schemes allow residents to rationalize accommodation-related costs and be part of a community, serving as an antidote to the solitude of today’s digital nomads. “Poland is no different from other European countries in this regard, except that those who would like to live in co-living developments in Poland will need to wait for such products to be built,” Mendel said.
To date, schemes drawing on the co-living philosophy have mostly been developed in Poland in situations when the developer was not able to secure a building permit for a regular residential development in a given location. The entry into the country of experienced co-living space operators such as the Medici Living Group shows that there is a lot of potential in the sector and allows one to hope that the scale and number of investments of this kind will grow quickly in the coming years, Mendel argued.
Admittedly, this will require operators’ cooperation with property owners and developers. The creation of the first co-living portfolios should attract more real estate investors interested in residential assets, including those who are now looking for such products in Germany. According to a recent report by JLL, the scale of investment in the so-called “living” sector in Europe – which besides co-living projects also includes rental apartments, student accommodation, and senior housing – could this year increase by even 30 percent.
In 2018, the European investment volume in the sector amounted to €69 billion, JLL data shows. The UK, Germany and the Netherlands were the most popular destinations for living investments. CEE countries accounted for 16 percent of the invested capital. The authors of the JLL report pointed out that the investment landscape in Europe is changing, with demographic, social and economic drivers impacting investors’ allocations. This is reshaping the potential for such asset classes as co-living.
Indeed, in the opinion of JLL experts, residential is likely to overtake retail as the second largest (after offices) sector in 2019. However, the shortage of suitable products is now cited by investors across Europe as the main barrier to investing in living. Tomasz Konarski, the CEO in Poland of Finnish developer YIT, was positive about the prospects for the co-living sector in the country, but he admitted that co-living is a relatively new phenomenon in the Polish market and his company is actually a trail-blazer there.
YIT last year announced the acquisition of land for a major co-living project in Warsaw. Called Smartti Mokotów, the planned scheme will be located in the Służewiec business area of the city and will comprise nearly 1,000 apartments. Besides housing units, the development will include co-working space, retail and service areas, reading rooms, gyms and a rooftop football pitch. Construction work on the investment is scheduled to begin in the final quarter of this year.
In Konarski’s opinion, it is still difficult to forecast exactly how fast Poland’s co-living sector will grow and in which direction it will go. He noted there are currently no schemes operating in the country that would have been planned from the very beginning as co-living projects. “However, the growing popularity of co-living projects abroad and the large client, media and investor interest that Smartti Mokotów has enjoyed since it was announced make us optimistic about the future,” Konarski said. “Poland is ready for co-living,” he argued.