With America’s main cities coping with a scarcity of reasonably priced housing and steadily climbing rents, a slew of firms have entered the “co-living” area lately. Taking cues from the “co-working” phenomenon exemplified by WeWork, they’ve regarded to construct community-oriented dwelling preparations and shared dwelling areas, at costs which might be extra reasonably priced for city millennial renters.
New York-based Frequent, which launched in its residence city in 2015, claims to be the biggest co-living operator within the U.S., with 700 beds in 25 properties throughout six cities. And it’s now plotting its largest growth but, Fortune has realized. Frequent is teaming up with actual property builders in Philadelphia, Atlanta, Pittsburgh and San Diego on $300 million price of latest properties in these cities over the subsequent three years. The tasks will greater than quadruple Frequent’s present footprint—including greater than 2,200 beds for lease throughout the 4 new markets.
Frequent’s present portfolio focuses on high-priced coastal housing markets, together with New York, San Francisco/Oakland, Seattle, and Washington, D.C. However the growth speaks to the broader demand for the idea, Brad Hargreaves, Frequent’s founder and CEO, tells Fortune. “Numerous the worth propositions—the comfort, the shared communities, the facilities we provide—enchantment to folks past simply costly coastal hubs,” he says.
Tenants in a typical co-living association every have their very own lease, protecting their bed room and shared areas in a gaggle suite. In Frequent’s case, these bedrooms and suites are totally furnished, and the price of cleansing and sustaining the shared areas and offering kitchen and loo provides (to not point out utilities and Wi-Fi) is bundled into the lease. Frequent is ready to preserve rents decrease, Hargreaves says, partly “by densifying these buildings,” placing extra models inside the similar spatial footprint than you’d discover in a typical condo property.
A hotel-style enterprise mannequin
The corporate’s growth will contain partnerships with builders who will construct and maintain many of the fairness within the new tasks, whereas Frequent will function “primarily a property administration model and operator,” in line with Hargreaves. (He describes the association as “similar to how the hospitality business works,” whereby main flags like Marriott and Hilton seldom personal the buildings by which they function.)
Frequent’s largest plans lay in Philadelphia, the place it’s planning round 1,000 new beds through $100 million price of latest developments. Frequent is partnering on these tasks with native builders like Elk Road Administration, which is at work on a five-story, 72-bed constructing within the Fishtown neighborhood that’s anticipated to open early subsequent 12 months.
“The story in Fishtown is much like different cities: we preserve seeing rents enhance and enhance, and it’s gotten to the purpose the place lease development is outstripping earnings development,” says Elk Road principal Paul Horos. Newly constructed one-bedroom residences within the neighborhood usually begin at $1,500 per 30 days, Horos says; the brand new Fishtown constructing, often known as Frequent Frankford, will begin at $995 a month for a bed room in a co-living suite that includes shared bogs and dwelling areas. (The property, like different Frequent buildings, may also characteristic some studio and one-bedroom residences for lease.)
As each Hargreaves and Horos put it, the co-living mannequin seeks to refine what’s lengthy been a lifestyle for folks dwelling in cities. “What we observed within the early days is that there aren’t quite a lot of properties constructed with roommates in thoughts, but an enormous chunk of stock in city facilities had been being taken up by folks with roommates,” says Hargreaves, who notes that one-quarter of households in New York Metropolis are “roommate households.”
After which there are extra intrinsic, human issues, Hargreaves says: “Seventy p.c of our members are shifting to those cities for the primary time.” Frequent offers co-living tenants with a group app that “connects folks primarily based on shared pursuits.” (It additionally permits residents to maneuver between co-living buildings in numerous cities with out having to interrupt their lease.)
Past Philadelphia, the corporate is pursuing a $75 million growth in Atlanta that can result in 600 beds; one other $75 million price of tasks in Pittsburgh that can add greater than 300 beds; and $60 million price of investments in San Diego that can produce one other 300 beds.
“All of those cities have scale…they’ve transit, and so they have a very vibrant cultural scene,” Hargreaves says of Frequent’s collection of its new markets. These are all necessary issues for the corporate’s tenant base, who’ve a median age of 30 and a median earnings of $70,000 per 12 months however can nonetheless discover metropolis rents to be out of attain.
Frequent is working in an more and more crowded subject, with WeWork’s WeLive enterprise already established in New York and Washington, D.C., and Berlin-based Quarters just lately asserting an bold U.S. growth of its personal. However Frequent—which obtained early funding from Dan Levitan and Howard Schultz’s enterprise capital agency Maveron, and which closed a $40 million Sequence C led by Silicon Valley agency Norwest Enterprise Companions in late 2017—is assured in its potential to distinguish itself from the competitors.
“Everybody has a distinct tackle [co-living]; for us, it’s very design-focused, and we actually need this to be a house,” says Hargreaves, noting that almost all of Frequent’s tenants are on 12-month leases. “We attempt to keep away from a extra ‘scholar housing’ feel and look.”
The corporate is receiving greater than 2,500 new functions from potential renters every week, Hargreaves says. “We’re gonna proceed rising,” he provides. “These aren’t the final cities we’re going to announce.”