Co-Living Returns To Philly, But Rents Will Have To Rise For It To Take Off

Co-living has made a small, quiet return to the Philadelphia market, but executives in the sector say it could be a decade before it catches fire in the same way it has overseas and in a handful of large, expensive metros like New York City and Washington, D.C.

A pair of co-living spaces are in the works or already operating in the city, and a push to add more single-room occupancy units to Philly's housing stock has been a focus for several years. Yet the concept, which typically offers extensive communal amenities among shared tenant units, is only slowly gaining traction and might not happen at all without a mix of better marketing, stable funding, friendlier regulation and stronger rents for studios and one-bedrooms.

“In Philadelphia, the prices, I will say, are relatively low. But for the markets like New York, Boston and Washington, the concept pencils out because of high rents,” Sergii Starostin, founder and chief executive at Outpost Club, which offers a network of co-living houses throughout New York City targeted toward millennials looking to share accommodations in one of the highest-rent cities in the nation.

Troubled co-living firm Common Living was the first co-living concept to plant a flag in Philadelphia four years ago, announcing plans to bring “dorm life for adults” to the popular Fishtown neighborhood. Those plans were ultimately downscaled after the onset of the pandemic, and the company opened the 12-unit Common Civic within MM Partners’ The Civic in early 2020. Today, about four of those units are listed for rent, though ownership is unclear.

Since that debut, the co-living scene has experienced other setbacks. London-based co-living firm The Collective sold off its nearly 100,000-unit global portfolio after filing for bankruptcy in September 2021. Quarters, a German co-living firm with properties in Chicago, New York and D.C., filed for Chapter 7 liquidation in January 2021.

Outpost Club took over a number of Common's NYC properties when it filed for bankruptcy in June, though none of its properties in Philadelphia.

But the sector is mounting something of a comeback in some of America's priciest cities, led by companies like Outpost Club, Cohabs, SharedEasy and Roomrs.

And New Jersey-based Urby, a joint venture of founder Dave Barry and Brookfield Properties, is dipping its toe back into the Philadelphia market with a 200-unit location set to open in Fishtown this October.

The 173K SF building at 1700 N. Front St. isn't marketing itself as a co-living spot, a change from a decade ago when Urby hosted big tenant dinners and events to launch amenity-laden apartment openings on the tails of a hot market for such developments. Instead, it touts a place that offers the “essentials of modern life,” with amenities like courtyards, a gym, work-from-home spaces and a busy corner cafe.

Urby, which also operates co-living spaces in New York and Dallas, with others planned for New Jersey, Connecticut, Washington D.C. and Florida, did not respond to Bisnow's requests for comment. In a June podcast with Hospitality Design, though, Barry said Urby's aim was to appeal to a new subset of younger renters: those who rent by choice and value mobility over homeownership.

“A few different factors come at once, and they say it changes the way people look [at] rentals,” Barry said. “It says, “Oh, wow, I’m a renter by choice. I want to rent. I value this mobility when I’m in these years, twenties or thirties, it gives me the opportunity to take new jobs and create careers in different places and explore.”

The co-living concept took off in major cities about a decade ago at around the time coworking, led by WeWork, also drew massive interest from venture capitalists. But given all that has followed, including a punishing pandemic, higher interest rates that have led to more caution and the demise of both WeWork and several high-profile co-living operators, that proved to be something of a fakeout moment, Starostin said.

“The real growth also will be in the next 10 years for this concept,” Starostin said, adding it would take time for market interest to return, especially in places like Philadelphia, where rents remain relatively low compared to other large cities.

Quarters' history in the city is one cautionary tale for not expanding too quickly. German firm Medici Living Group announced plans for “the WeWork of co-living” in Northern Liberties, its largest Quarters co-living building in the nation, before the pandemic. The project would have included 186 residential units spread across 74 shared apartments.

But the firm folded in 2021 with a bankruptcy filing. The site at North 12th and Callowhill streets will now offer 144 regular single-occupancy apartments.

“It’s not that there’s not a market for [co-living], but a question of how and how fast it can grow,” Starostin said.

2024 data from CBRE shows that multifamily is still the second preferred type of alternative investment in the U.S., behind CRE debt, and that there is growing investor interest in co-living investments, which remain attractive to young tenants.

Co-living units are offered at about a 25% discount to single-room studio counterparts, said Susan Tjarksen, a managing director at Cushman & Wakefield, a strong selling point in 2024.

“We've seen, very much, an adaptation of this space [type for] people who are moving cities for work or don’t want to pay for a studio alone,” she said.

That is particularly true in Northeastern cities that are home to medical, financial and other professionals who move often and want furnished rooms, flexible leases and options that aid mobility.

Co-living is a boon for young professionals who are transferred to higher-cost neighborhoods or must “make economical rent choices, especially when you have work to start within two weeks,” Tjarksen said.

A surging job market could also give the sector a shot in the arm, Tjarksen said.

But Fishtown, Northern Liberties and other sought-after neighborhoods have plenty of new traditional studio to three-bedroom units available for rent, many offering top amenities, thanks to a flood of multifamily permits that rushed in before the end of a tax abatement program two years ago.

There are also physical limitations that impede co-living concepts from flourishing in Philadelphia.

Executives at Cohabs, which will debut shared houses or units in New York soon, told Bisnow that Philadelphia has built-in constraints due to its parking culture and tenant expectations parking will be available.

“It's really hard from a co-living perspective to fit everyone's parking requirements into a housing complex that's already a little denser than the standard,” said Cohabs Senior U.S. Director James Grasso. 

Local laws and regulations are much friendlier to co-living in European cities or New York, allowing up to eight people per unit, Grasso added.

By contrast, Philadelphia categorizes co-living as congregate housing, and most of the city is only zoned to allow up to four residents who are not related within one unit, noted Derek Green, an attorney at Obermayer, Rebmann Maxwell & Hippel LLP.

Green, a former city councilmember, proposed a bill to revamp Philadelphia’s single-room occupancy laws back in 2022. That died on the floor.

As it stands today, permission for multiple tenants per unit requires buy-in from the entire city council. Green, whose primary focus in bringing the legislation was producing more affordable housing, said it is going to be important to differentiate co-living from the concept of boardinghouses, “which is what people always think of when they think of changing the SRO status.”

Laws facilitating more co-living would require a change to zoning laws that ensures units are safe enough for people in emergencies and other situations while proving conducive to battling high housing costs.

That change faces an uphill battle in Philadelphia, Green said, though maybe less so than when he proposed changes two years ago.

“I think there may be a little more receptive perspective to this idea of co-living because they — not only council members, but even those who may have been opposed locally — they have family members, friends and others who are having challenges of finding housing,” he said.