As housing shortages and affordability challenges escalate in major UK cities, a new model of rental housing is gaining attention: co-living. Once seen as a niche alternative, co-living is now emerging as a viable, even strategic investment opportunity for PBSA investors.
By Oliver Cummings, Managing Director and Head of PBSA, Cain International
PBSA has long established itself as a secure investment due to the consistent demand of a growing student population. However, as urban living intensifies amid a housing and affordability crisis, the case for investing in co-living has magnified considerably.
Market momentum and demand drivers
In 2024 alone, investment in the UK’s co-living sector reached £240m, bringing the five-year total to £1.1bn. While London continues to dominate, regional markets such as Manchester, Birmingham and Bristol are rapidly gaining traction. There are now around 9,000 operational living units and 5,000 under construction.
This surge in activity reflects the high demand for housing in employment hotspots, where private renting remains the main option for young people building their careers post-education. Due to demand far outstripping supply, private rents have risen by a staggering 43% in three years in London and the UK’s big six cities of Manchester, Birmingham, Leeds, Bristol, Edinburgh and Glasgow.
Co-living is proving especially attractive to tenants between 20 and 40 years old, who want convenient, quality homes offering amenities and social opportunities as an alternative to the traditional PRS house or flat share.
Co-living, a natural extension of PBSA
Cities and towns with high graduate retention are obvious key markets for co-living. These locations often attract international postgraduate students and professionals who value the simplicity of co-living over navigating individual energy bills and council tax, and other complexities of traditional rentals.
PBSA and co-living increasingly operate in tandem. At Cain International, we recently partnered with UK-based real estate developer Olympian Homes, to acquire St James House in Bristol where we are delivering two buildings; one housing 442 student beds and the other providing 150 larger co-living units. Bristol has a high graduate retention rate, with attractive employment opportunities, and what could be more natural than starting in PBSA and progressing to co-living, while retaining access to excellent amenities and community.
A broadening tenant base
But the tenant pool is more varied than this. International professionals and even older workers – those who previously may have opted for a pied-à-terre – are signing up as co-living tenants for flexibility, social structure and convenience.
This broadens the tenant base, offering PBSA investors an opportunity to diversify income streams beyond the student demographic.
Investment outlook
In terms of viability and outlook, the latest co-living schemes have witnessed strong lease-up rates and low vacancies. Last year, construction was limited by higher build costs and interest rates. This year, with inflation easing and base rates expected to fall, investor sentiment is improving.
Co-living’s premium pricing model, high occupancy levels and bundled services such as housekeeping, maintenance and events enhance its value proposition. These features can also help retain tenants, reducing costly turnover.
However, some challenges remain. Planning policy around co-living is still evolving, and many local authorities have limited experience with the format compared to PBSA. That said, more authorities are recognising its role in addressing housing shortages alongside affordable housing, Build to Rent, PRS and home ownership.
Co-living presents a compelling opportunity for PBSA investors to extend their reach and reduce demographic concentration risk. By aligning with urban living trends and evolving tenant preferences, investors can tap into a growing, resilient rental segment that complements student housing, and supports longer tenant journeys from education.
