Co-living: the trend to watch in 2020?

Co-living: the trend to watch in 2020?

MAIN IMAGE: Prof Francois Viruly speaking at the 2019 TUHF Inner City Property Conference.

In a country characterised by stubbornly high unemployment, a lack of safe, affordable housing and a slow retail sector – the formation of integrated neighbourhoods featuring buildings designed for spatial economy, variety and convenience may provide a way towards solving these social issues.

Co-living emerged as 2019’s top trend

Co-living – defined as intentional communities that provide shared affordable living spaces and facilities to people with similar interests and values – emerged as 2019’s top property trend, says property economist Professor Francois Viruly. He says co-living ranked in pole position as a prospect for both investors and developers alike and has already proven popular in major metros across South Africa and internationally.

“It’s no surprise that tenants are eager to experience the convenience of mixed-use spaces for themselves. When housing, public services, transportation options and work opportunities are nearer to the places where we live and raise our families, the knock-on effect can create astounding changes in local economies. Smaller living spaces become practical, rentals and transport are more affordable, and much-needed spending power goes back into the pockets of residents, who go on to use it to support local businesses,” he explains.

Additionally, he adds that retailers operating in these same buildings get much more of the vital foot-traffic they need to thrive, and investors enjoy the rise in property values that inevitably follows when a good mix of variable and fixed tenants is established.

Related reading: Communal living on the increase in South Africa

Keeping a lid on rental increases

Viruly points out that research conducted by the Urban Real Estate Research Unit (UCT) showed a promising downward trend in CBD office vacancy rates in most major South African metros, although a depressed economy also means that increases in rents have in addition slowed somewhat (to its lowest rate since 2015).

“Where rental increases of up to 8% were possible in the past, it’s essential in today’s economy for property owners to keep their operational costs in check. Today’s average rental increases are sitting at only around 4%. This applies to all sectors, from retail and industrial to office and residential,” he said.

Vibrant night-time economy vital

Drawing on notable examples like Amsterdam, Viruly suggests that without a vibrant night-time economy such as 24 hour hairdressers and retail shops, regenerative efforts can only go so far.

“Developing such an economy,” he argues, “will be vital in drawing in tenants and creating sustainable and diverse business-friendly neighbourhoods. Already, some of South Africa’s most exciting dining and nightlife opportunities exist in our urban areas, and this trend is set to only continue, with lower rents and mixed working and living spaces proving attractive to innovative businesses ready to cash in on a young middle-class audience with rising disposable income.”

What is holding property entrepreneurs back?

The opportunities for exponentially faster and grander growth in our inner-cities are tantalising, but several challenges face many in South Africa’s entrepreneur class as it gets a handle on this often-overlooked property segment. Professor Viruly highlights the following:

  • A legacy of apartheid land policies means that many in South Africa have little inter-generational knowledge in the areas of buying, selling and managing property, and though programmes and incentives exist to help them break into the sector through funding, education and mentorship, these remain a rarity.
  • Legal and municipal red-tape presents another frustration for would-be investors – the release of land for development is a slow process and involves fulfilling multiple procurement requirements, not to mention dealing with zoning and time delays, and inefficient municipal billing systems.

If these can be successfully navigated by aspiring entrepreneurs with the grit to succeed, however, the sky is the limit.


Background information: Professor Viruly delivered this talk on the topic of co-living at last year’s annual TUHF Inner City Property Conference. TUHF provides commercial property finance in South Africa. Prof. Viruly is a property economist with over twenty years of experience in advising public and private entities, and Associate Professor and Director of the Urban Real Estate Research Unit at the University of Cape Town (UCT).

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