The Future is Coliving: Why X Social Communities is Betting Big on this Trend
Many commercial real estate investors and developers believe that coliving is the future of multifamily, especially in densely populated metro areas. But how does coliving differ from today's shared rentals or the boarding houses of the early 20th century? What target market does it serve? To answer these questions, we're chatting with Ryan Shear, principal at developer Property Markets Group (PMG), which operates coliving apartment buildings under its X Social Communities brand.
The new concept by PMG has launched in Miami and Chicago, with plans to launch in the next five years in Denver, Phoenix, California, Florida, and other high-density cities experiencing significant economic growth. Their foray into the coliving space is aggressive, especially when you consider that most of the upcoming X Social properties will be purpose-built, not renovated and reflagged. Here, Shear provides some insight into where the coliving trend is headed.
LoopNet: What's the difference between coliving apartments and traditional apartments?
Shear: In a coliving situation, it's synonymous with rent-by-bedroom, so you're cohabitating with another person. From a technical stance, in coliving situations you're on your own lease. Coliving units are typically fully furnished, and there are other pieces of the puzzle, like typically no pets in the buildings.
LoopNet: What's the difference between coliving apartments and executive apartments or extended stays?
Shear: Executive apartments are typically for short-term stay, a month-long or similar product, whereas coliving arrangements are typically 12-month leases. Usually there's no difference in a standard lease and coliving lease. Extended stay is interchangeable with executive stay—a month-long rental. Those two are similar and compete with each other.
LoopNet: Can property owners in any of the above categories repurpose properties to be coliving buildings?
Shear: You can do it, but I think you end up with a product that's not pure. It's a little tricky. For example, in a lot of our coliving suites, the bathroom is within the bedroom so you have your own world in your bedroom—everything is en suite. Also, amenity platforms are hard to redo. A lot of people try to do it—most of the brands out there go out and reflag existing properties, but they're not purpose building for coliving. That is what makes X Social Communities different.
LoopNet: Your company has reflagged an existing building successfully in Chicago but is building new, purpose-built communities going forward. Why?
Shear: When we built the L, our Logan Square property, we started to test the rent-by-bedroom program. It was designed with that in mind—with a larger amenity platform and the ability to live with roommates. It was a smaller building and we tested out the three-bedroom line to be specific. It was built with the capacity to do a sample size of what coliving would look like. We were testing to see if it was viable from an ownership perspective. It wasn't that many units, only 10 to 20 apartments in total. We were making the decision to focus on coliving while we were testing.
LoopNet: Do coliving and coworking always go together?
Shear: They're like brother-sister asset classes. They naturally do go together very well but you can absolutely have one without the other.
LoopNet: What are the particular challenges of working with a city to get a coliving building permitted?
Shear: It depends on the city and their specific codes. South Florida is all for it—they're trying to solve the affordability issue, and we agree it's a big part of the solution. Other cities are tougher. They're not as progressive; they have laws on how many people can live together, or what's considered an apartment. Or there could be complications with the fire code. Some cities are harder with entitlements than others. It really is market dependent.
LoopNet: In certain residential real estate markets, there is expected to be a rep for the renter and a rep for the landlord. Due to the unique nature of your rental model, do people still need to work with listing agents, or do you handle that aspect in-house?
Shear: Funny you ask, we're building an in-house leasing team now. We still work with the outside community but we're building an in-house team because we think we're going to be able to manage leasing. A lot of apartment owners end up owning their own property management and doing everything in-house. We don't plan on owning our own property management firm, but are definitely moving in-house for leasing, which is organically a part of sales and marketing, along with social media and events.
LoopNet: You decided to add a hotel component to your Miami property. Why did you do this?
Shear: We took in a group called The Guild, based out of Austin, Texas, on the lowest floors in the apartment building. They master lease all the apartments, so for our business plan it's accretive. They rent out a lot of apartments at once, take a lot of risk off the table, and the hotel flag is a good partnership for social building. They manage themselves, and are effectively one tenant.
We like The Guild—they married with our brand very well. Part of our business plan is about being very social, keeping the product activated, and the luxury hotel model supports that.
LoopNet: Are you seeing interest from retail, restaurant, and other businesses that want to rent space in these properties to reach a certain target demographic and lifestyle?
Shear: The short answer is yes! The truth is we don't know where this brand is headed. We're just in the first innings and this is going to change a hundred times over the next decade. Every week, a new idea or concept gets put on the table that's helpful to the brand. Within the building itself it's the things you'd expect—gym partnerships, food and beverage, and any activity that you can do in a pool, deck, or gym. But there are retail spaces on the ground levels. We're finding more partnerships, more growth, more refinements in how we lease and how we sell this lifestyle.
This interview has been edited for clarity.
