A number of prominent venture capital firms are making a big bet: that young adults would rather live in dorm-style housing than with roommates, reports Eliot Brown and Laura Kusisto of The Wall Street Journal.
Shared office space giant WeWork Cos., recently valued at $16 billion, and a handful of smaller startups are experimenting with “coliving,” a concept that involves tiny apartments, shared kitchens and lounges, and a communal atmosphere.
Unlike traditional investments in the real-estate sector, which tends to be a slow-growth market with moderate returns, financial backers including Fidelity Investments and consumer-focused venture-capital fund Maveron are betting on hyper-fast expansion and startup-like profit.
The wager is that 20-something residents moving to new cities will pay a premium to live in clusters of small apartments packed with peers in similar places in their lives. Apartment rents in big cities are high, furnishing an apartment is expensive and finding housing on Craigslist can be daunting, the thinking goes.
But Brown and Kusisto do identify challenges with the plan:
The economics of the business are tricky. Prices need to be low enough to appeal to young workers, but high enough to make more sense for landlords than other uses like microapartments.
The coliving model has already proven unworkable for one startup, called Campus, which folded in 2015 after opening more than 30 clusters of rooms in two years.