Brad Hargreaves, the entrepreneur championing the "co-living" movement -- where residents share spaces with roommates, and get basic amenities in return -- is shifting away from his core model.
On Monday, Hargreaves confirmed that Common, the property-management business that oversees shared apartments for tenants in New York and San Francisco, will be opening a new, 140-person building in Brooklyn's Boerum Hill neighborhood. The building, called "Baltic," will be accepting tenants as soon as next month -- renting out studio and one-bedroom apartments in addition to the less traditional, shared living spaces that Common has built its business on.
In essence, the move is a hedge against the risk that a co-living company takes on when entering into a partnership with developers, when it's not entirely clear that the need for shared space (as opposed to a room of one's own) is great enough.
"It's a lot easier to get developers to build something if not all of your eggs are in the co-living basket," Hargreaves tells Inc. "You can do stuff at a much bigger scale when you're doing hybrid buildings." At Baltic, rooms with a shared-kitchen will rent starting at $2,000 per month, and private, one-bedroom apartments will start at $3,295 per month.
Still, the entrepreneur insists that the issue is not one of demand, noting that Common sees roughly 300 applications for spots in its buildings each week. "It [the market] is certainly not too small," he says. "But it's very tough to get banks, who are doing the underwriting, on board with this idea for a full [co-living] building."
The new, house-sharing economy
The premise of co-living, simply put, is that Millennials operating with a meager yet manageable income want the experience of communal housing that won't break the bank. The cost for a spot in a Common building ranges from $1,000 to up to $3,000 per month, depending on the neighborhood. Hargreaves describes his demographic as the "under-served, middle of the housing market"--which, in other words, are those who have an annual income of somewhere between $40,000 and $120,000.
Elliot LaRue, a singor, actor, and entertainer who has lived in a Common room as part of an artist-in-residence program, says the living space was the perfect setting to finish an upcoming album.
"My project has been in the works for a few years, [and this] gives me a chance to have a place where I can not worry about my rent, recorplaceholderd there, and show people some samples of my work as well," LaRue said in an interview.
For Jeremy Schrage, a freelance consultant and startup adviser, co-living spaces provide excellent networking opportunities. "I'm relatively new to New York, and my perception is that New Yorkers that are in their late 20s tend to separate and have one-off relationships," he adds. Schrage lived in a Common room for more than six months.
It's worth pointing out that Common, while not profitable overall, has been making money on each of its five investments. The business generates revenue by taking a cut in tenants' rents,placeholder and from the building's net operating income; in return, it manages the upkeep of these properties, including furniture, cleaning services, and organizing community events, such as a pizza dinner or Netflix movie marathon. Hargreaves, who found success with his first venture, General Assembly, has raised nearly $26 million funding for Common, from investors including Maveron, Lowercase Capital, Slow Ventures and 500 Startups.
Common is among the latest, but certainly not the only entrant in this shared-housing industry. WeWork, the $16 billion co-working giant based in New York City, recently launched WeLive, a co-living project in New York and Washington, D.C. for example. Schrage, the freelance consultant, lived in Common for more than six months, but recently moved to a WeLive room in Manhattan in October, where he pays $3,000 for a private unit with a bathroom and a kitchen. "I still consider it co-living because there are shared common spaces," he says. "The main reason [I moved] was to be back in Manhattan."
Hargreaves would not comment on Common's revenues, but says that it recently surpassed 100 members (residents,) and will have several hundred by next spring, thanks to the opening of the Baltic project, and a forthcoming building in Washington, D.C.'s Shaw neighborhood.