Founded in Brooklyn in 2015, Common Living is an early pioneer in a new business in residential property management: Instead of renting out entire units, it rents out rooms to individuals. Utilities, Wi-Fi and cleaning fees will be bundled with the rent, and the apartments will be fully furnished.
Co-living has since grown rapidly in the U.S. and around the world, but Common Living’s journey as a pioneer of the model came to an abrupt end late last month when the company announced it would file for Chapter 7 bankruptcy and liquidate its assets. The company, which operates 5,200 apartments in 12 U.S. cities, now joins a growing list of co-living operators that have stalled, raising questions about the future viability of the model.
In 2023, Common Living merged with Berlin-based rival Habyt, creating a combined entity that operates more than 30,000 units in more than a dozen countries. Habyt CEO Luca Bovone said that while Common’s closure is unfortunate, its liquidation will allow Habyt to become a profitable company.
“This decision, while not what we had hoped for, will give the remaining members of the Habyt Group greater financial flexibility and greater ability to accelerate growth and create value,” Bovone said. Bisnowa website dedicated to commercial real estate news.
Thousands of Common’s units will be taken over by Outpost Club, another giant in the model that already operates about 1,500 units in 40 buildings in New York City. Sergii Starostin, CEO of the company, said: wealth They took over management of seven properties before filing for bankruptcy, and Outpost is targeting 50% of Common’s inventory.
While many co-living companies have folded during the pandemic, Common is aggressively expanding its portfolio and raising capital. The company acquired approximately 5,000 units between 2020 and 2022, and by 2023, it had raised more than $110 million in venture capital. However, during the interview New York Timesthe company’s founder Brad Hargreaves declined to comment on whether Common is profitable.
Outpost Club’s Starostin said he believes Common’s massive funding may actually have contributed to its financial woes, as the investment fueled the company’s rapid expansion in markets such as Nashville, Ottawa and Chicago.
“Common needs to grow quickly in many places,” Starostin said wealth, explains that purchasing a single property in a new market requires setting up an entirely new staff and marketing operation. “When you multiply that by 20 … it becomes a pretty expensive journey. My point is, it just takes more time to scale this type of business.
Habyt CEO Luca Bovone said Burundi Common’s bankruptcy is believed to be related to increased pressure on the company’s contracts and business, as well as interest rates.
This is not the first time Outpost has stepped in to manage a former competitor’s contract. It took over some of Bedly’s sublease agreements in Manhattan and New Jersey when it collapsed in 2019, and it did the same when the German company Quarters declared bankruptcy in 2021.
Like Common, Quarters failed despite its success in raising venture capital. Medici Living Group raised $300 million for its German subsidiary to fund U.S. expansion in 2019.
“Venture capital doesn’t work well in real estate because we see demand growing very rapidly in 10 or 15 different markets,” Starostin said. “So I think these companies are failing because they’re being asked to be in so many different markets. It’s growing too fast, and that’s hard to do 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 disturbed by the news about Common earlier this month, she also said it wasn’t surprising given the amount of money invested in the company’s expansion.
“When you raise venture capital, you’re under pressure to grow and deliver quickly,” said Arroyave, who founded and ran a co-living company in Boston that folded during the pandemic. “A lot of times you’re forced to expand room count, demand or market, and you’re growing without profitability or with very high overhead costs.”
Starostatin tells us that unlike other well-known competitors that have stalled wealth The Outpost chose to focus its operations and expansion plans in New York, where they already had an established staff and marketing network.
The pandemic has been a severe test of that model, with some of the largest operators closing their doors as many potential tenants gave up on close-quarters living arrangements with strangers. When Quarters folded, the company was operating approximately 3,000 units and was developing an additional 1,500 units. WeWork’s co-living arm WeLive also went bankrupt in 2021, as did The Collective, a UK-based company that owned nearly 100,000 apartments when it declared bankruptcy.
In addition to the pandemic, expansion issues and high interest rates, co-living companies must contend with more specific issues facing their relatively new approach to housing. Many companies are promoting themselves less as traditional hosts and more as platforms that connect people with available rooms. Potential renters don’t have to worry about finding roommates to rent an entire apartment or a year’s lease. Rooms are rented individually and people usually stay for only a few months. But this fluid, hands-off approach can cause problems in some cases.
2022, daily beast Some tenants at Common Living properties complained to the company about safety issues, poor maintenance and potential dangers to residents living on site, the report said. A tenant posted in an apartment group chat that he planned to set the building on fire, but residents cited in the article reported that Common’s response team failed to communicate or handle the situation in an appropriate or timely manner.
However, despite the closure of Common and other competitors, Co-Living Cashflow’s Arroyave and Outpost Club’s Starostin said they believe the business model will survive. Although its progress has been fitful, the core of the co-living concept is flexibility and easy access to housing, which there is sufficient demand among young renters.
“Young people can’t afford rent, and the fundamentals of housing — in New York, Boston, Los Angeles — those numbers are not going to change dramatically anytime soon,” Arroyave said. “But for co-living to stay strong, the question is, What parts of the business model aren’t working?”
“The move already exists,” Starostin said. “I don’t think it’s going anywhere. It’s just a matter of who is going to grow in this market, but the market itself is there.
