However, it has also been claimed that it isn’t as hard to obtain as it used to be, with co-living becoming a more common type of development.
Development Finance Today asked property experts about the difficulties of getting funding for such developments and whether this will change if big developers enter the space in the future.
How hard is it to gain funding for co-living developments currently?
“Not as hard as it has been in the past,” said Andrew Clissold, property partner at law firm Joelson.
“There has been a noticeable shift with private and institutional investors now seeking out opportunities to invest in co-living schemes, and funders are also prepared to lend against them.
“This is in contrast to the point at which co-living schemes first emerged, when investors and funders were more wary of what was seen as a riskier investment.”
Barry Glantz, developer of The Studios24, added that while it had been successful with acquiring funding for its first development in Wolverhampton, it had found acquiring funding challenging.
“When we first started talking to funders, it was difficult.
“They couldn’t see how the co-living concept would work.
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“However, I put my own money in and now funders are starting to contact me.
“There’s been a major change in mood.
“A new deal with high street banks and mainstream lenders will pave the way to future developments.”
Barry believed that funding for co-living was in the same position that funding for student accommodation was 20 years ago.
However, he felt that this would change when the banks observed the growth in the market.
Andrew stated that the emergence of co-living as a viable alternative way of living had helped to facilitate the change.
“We are actually at the start of the co-living journey and it is still a small part of the private rented sector.”
Will big developers enter the space, and will it become the norm?
“Canny marketing, all-cost inclusivity and competitive pricing have made co-living developments popular among trendy twentysomethings,” said Gareth Belsham, national head of building surveying at Naismiths.
“Now they are increasingly piquing the interest of lenders as well as developers.
“Barring an improbably quick resolution of the UK’s housing crisis, the northbound march of co-living developments is a sure bet — particularly in fast-growing hotspots, such as Manchester and Birmingham.
“This trend was always going to strike a chord with lenders, who have now recognised there are significant and sustainable wins to be achieved.
“Bigger co-living projects will inevitably require bigger developers to spearhead them."
Andrew agreed that it was only a matter of time before big developers entered the space.
“We are already seeing new entrants to the market and the number of schemes coming through is increasing.
“As the market matures, I expect we will see a number of different operators enter the market with different offerings at different price points in the same way that the hotel and co-working sectors have grown and diversified at the same time as lifestyles change.”