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Co-living opportunities ramp up in commercial real estate
Assets designed for co-living have been identified as the next major growth sector in commercial real estate, driven by growing demand and strong yields.
According to Knight Frank's latest research, co-living has established itself as one of the hottest sectors in the commercial property market in 2025, with the trend expected to continue into 2026.
The Co-Living Report found that national supply had reached the 10,000-unit milestone over the past 12 months, including planned and under-construction units.
According to the report, co-living offered a more affordable alternative to private units, which were often located in urban areas with access to existing amenities, transportation and employment opportunities.
Average rents for completed developments in Inner Sydney started at $675 per week, compared to $730 for a privately leased apartment.
The report found that the units primarily appealed to a younger demographic, with 90 per cent of tenants aged 20-40.
Sydney has been leading the country in the co-living space, accounting for more than 90 per cent of completed schemes.
NSW also accounted for more than 80 per cent of the co-living apartments currently planned nationally, with the asset type performing strongly in land-constrained areas such as Sydney.
Knight Frank partner, living sectors – valuation and advisory, John-Paul Stichbury, said that interest from developers and investors had led to significant growth in the sector.
“Co-living has established itself in Australia as a genuine alternative to traditional housing types, and its momentum is expected to continue next year with development spreading across the nation,” Stichbury said.
“For now, NSW has dominated co-living development with a clear and supportive planning pathway, which the other states don’t currently have.”
“We anticipate a further acceleration in the overall pipeline in 2026 as developers respond to growing demand for this product type.”
With most co-living developments occurring in NSW, the report identified approximately 1,110 units in the pipeline across Victoria, Western Australia, and Queensland, highlighting opportunities for sector growth.
Additionally, the report found that co-living schemes were increasing in scale, with an average of 37 units per completed development, rising to 78 for those with approval and 130 for proposed projects.
Knight Frank partner and head of alternatives in Australia, Tim Holtsbaum, said the co-living sector had attracted greater investment interest as the number of completed units increased.
“Over the past two years, meeting feasibility thresholds has been challenging across the living sectors, but co-living has weathered the storm and in many cases developers have found it easier to proceed with co-living schemes rather than larger format and larger scale build-to-rent (BTR) or build-to-sell (BTS) developments,” Holtsbaum said.
“With bond yields settling above 4%, the bar that real estate is assessed against is higher than it was previously, and a product that is highly efficient and derives a relatively higher cashflow on a per square metre basis compared to its peers has enabled co-living to buck the trend.”
Holtsbaum said that co-living had begun to gain a foothold in Australia, despite its relative youth as an asset type.
“The next five years will see the first wave of large-scale co-living assets come online, increasing participation from institutional investors and wider acceptance of co-living as an effective tool to both improve housing diversity and accelerate housing delivery,” he said
“In many ways co-living is following in the footsteps of the Build to Rent sector, which has passed through its early growth phase and is now gearing up for a second stage of expansion.”
UKO co-founder Rhys Williams anticipates that co-living will be integrated into more BTR designs as it becomes more understood as an asset.
“The bottom line is that co-living is a great way to live and rent, it solves housing for singles and provides flexibility and community, which is very valuable to a significant portion of the rental market, Williams said.
“Co-living is an absolute winner for consumers, developers and investors, so it is here to stay,” Williams concluded.