Co-Founder & CEO of Anyplace.
In 2020, the Covid-19 pandemic shook the world. No one expected an invisible virus to have such a huge impact on all industries, including real estate. Vaccinations have begun, and as they continue, there is even greater potential for containing the pandemic. In real estate, it’s time to consider the question, “What areas of opportunity are there in the housing rental sector post-Covid-19?”
The Impact Of Covid-19 On Real Estate Startups
Among real estate startups, short-term rentals and co-living marketplaces were greatly affected by Covid-19. Many followed a so-called sublease and master lease model. They bought up inventory, but the impact of the coronavirus was such that people stopped traveling and, instead, moved out of the cities, which greatly reduced revenues. Thus, businesses with such models couldn’t cover the cost of their inventory to sell it at a profit.
In the short-term rental space, big-name startups such as Domio, which raised over $100M in total, Lyric – in which Airbnb invested – and Stay Alfred along with HubHaus and Quarters in the co-living space all shut down. This shows that the real estate industry has been severely affected by Covid-19, but it does not mean that the managed marketplace and co-living sectors were entirely unsustainable.
In fact, Sonder raised $170 million and Selina – a company that lists some of their properties on my company’s platform – raised $50 million in short-term rentals, while Zeus garnered $15 million in corporate housing, Common saw $50 million, and Starcity $30 million in co-living during the pandemic in 2020. They were not only ready to survive the pandemic but to also accelerate their businesses in preparation for the post-Covid-19 era.
Although not in the rental space, Opendoor, a managed marketplace for buying and selling real estate, launched an IPO at the end of 2020. This was good news for real estate startups, proving that they can generate several billion in sales – even during a pandemic.
Pandemic Spurred A New Lifestyle
The growth and additional investment into these companies show Covid-19 is not all bad news for the real estate industry. Remote work has become more common as the pandemic pushed many companies to offer remote work – in some capacity – permanently. This change in the way people work created a huge business opportunity. The biggest change is seen in people’s lifestyles. With remote work growing as an option, more people are exploring the nomadic lifestyle and slow travel.
MBO Partners published research showing that around 10.9 million American workers would identify as digital nomads. This is an increase of 48% from 2019. You can see the change in traditional workers, as well, with the number of them working as digital nomads increasing 96% – from 3.2 million to 6.3 million.
This new digital nomad lifestyle is growing thanks in some part to the pandemic. And a section of remote workers will prefer to stay in co-living spaces rather than apartments or hotels to connect with like-minded people. While co-living has often been discussed in the context of urban millennials, it may also become common to talk about housing for remote workers in the near future.
Why Remote Workers And Nomads Choose Co-living
Hotels and even corporate apartments have advantages, especially in a time of social distancing. There are several reasons, however, why remote workers and nomads might prefer co-living to other alternatives.
Community: There are people who aspire for a free nomadic living lifestyle, but many of them feel lonely because they don’t typically have friends in their destination. So, they need more than just accommodations – they need a community. By choosing co-living, they don’t feel as alone since they can connect with others at their new location.
Work Environment: Co-living is usually characterized by flexible monthly rental contracts for fully furnished accommodations, but many co-living spaces also offer a better work environment with fast Wi-Fi and desks. Such work-related amenities may not be found in every hotel and short-term accommodation, which can’t make the branding of a co-living space attractive to workers.
Reasonable price: If companies are not helping to foot the bill, furnished monthly rentals may be too expensive for some workers. These workers may find a preferable price in co-living spaces. They do need to accept shared living rooms and bathrooms – one of the ways co-living spaces keep prices competitive.
Co-Living Offers An Option After The Pandemic
There’s no question: many remote workers and nomads are here. I believe slow travel and nomadic living will become even more common after the pandemic, so we might well see more hostels pivoting to co-living in the future. Co-living will not only open up opportunities in urban areas but also in rural regions and unique destinations. Co-living will offer one opportunity for real estate owners and operators in the post-Covid-19 rental business.