Common Living’s Bankruptcy: A Closer Look at the Co-Living Model
Founded in Brooklyn in 2015, Common Living was a pioneer in a unique residential property management model. The firm would lease out individual rooms rather than entire units, bundling utilities, WiFi, and cleaning costs with the rent, and fully furnishing the apartments. However, the trailblazing journey for Common Living ended abruptly last month when it announced its filing for Chapter 7 bankruptcy protection and liquidation of assets.
Co-Living’s Rapid Expansion
Co-living has seen a significant expansion not only in the U.S. but globally over the years. However, the collapse of Common Living has raised questions about the future viability of this model. The company, which operated a portfolio of 5,200 units across 12 U.S. cities, now joins the growing list of co-living operators who have faced financial difficulties.
The Merger of Common Living and Habyt
In 2023, Common Living merged with a Berlin-based competitor, Habyt. This merger resulted in a combined entity that operated more than 30,000 units in over a dozen countries. Habyt’s CEO, Luca Bovone, expressed that while the closure of Common was unfortunate, its liquidation would render Habyt financially agile, with an increased capacity for growth and value generation.
Outpost Club’s Takeover of Common’s Units
Many of Common’s units will be taken over by Outpost Club, a major player in the co-living industry. Outpost Club’s CEO, Sergii Starostin, stated that they had assumed management of seven properties before Common’s bankruptcy was filed and that they aimed to acquire 50% of Common’s inventory.
Common Living’s Expansion and Financial Struggles
Common Living was aggressively expanding its portfolio and raising funding during the pandemic, acquiring around 5,000 units between 2020 and 2022. However, the company’s founder, Brad Hargreaves, declined to comment on the profitability of the firm. Starostin believes that the rapid expansion and the massive funding that fueled it may have contributed to Common’s financial troubles.
Outpost’s Approach to Co-Living
Unlike its competitors, Outpost Club has chosen to focus its operations and plans for expansion in New York, where it has already established staff and marketing networks. The co-living model faced a serious test during the pandemic, with many potential tenants opting against sharing living quarters with strangers. Outpost Club, however, has managed to weather this storm.
Co-Living’s Challenges
Beyond issues of expansion and high interest rates, co-living companies face unique challenges related to their relatively new approach to housing. However, despite the closure of Common and other firms, both Co-Living Cashflow’s Clara Arroyave and Outpost Club’s Starostin believe the business model is here to stay. The key question they pose is what aspects of the business model are not working and need to be adjusted for co-living to remain strong.
