Big Developers Roll Out Co-Living Units to Woo Millennials

Property Markets Group

Numerous startup companies, including WeWork Cos., have launched apartment-sharing businesses that rent out individual rooms rather than entire apartments.

Now some traditional real-estate owners are getting in on the act.

Property Markets Group, a 25-year-old developer, already has started offering a “co-living” option in one of its Chicago buildings through its newly created PMGx division.

Firm executives say they plan to expand the offer to more than 7,000 beds in 3,500 apartments in the next few years as they develop buildings designed for co-living.

The arrangements typically are geared toward millennials. Individual rooms are smaller than those in standard one- and two-bedroom apartments, but each of PMGx’s units typically will have its own bathroom.

“Everyone is trying to wrap their arms around new living concepts for millennials,” said Ryan Shear, a principal with Property Markets Group, which has developed about $4 billion worth of more conventional rental buildings and condominiums since the 2008 crash.

The benefits for PMGx tenants are primarily financial. When people rent rooms rather than apartments, their rent will be as low as $1,000 a month. In cities like Chicago and Miami, renting an apartment alone can cost twice that much, Mr. Shear said.

“If you’re 22 years old, and you just got your first job out of college, you’re looking for the cheapest point of entry in a market,” Mr. Shear said. “All you want is a room.”

The co-living apartments might cost a bit more to develop than conventional apartment buildings because they will have a separate bathroom for every unit, rather than, say, one bathroom for a two-bedroom apartment. Most units will come partially furnished with built-out closets and TVs.

But more revenue will make up for those higher costs, Mr. Shear said. Property Markets Group will be able to charge more for a co-living unit than the firm would if the same space were taken by one tenant.

“We’re juicing the rents,” Mr. Shear said.

Competition is coming from startups like WeWork that often don’t own their apartments. Rather they cut deals with landlords and then remodel the buildings and units for co-living.

WeWork, which is best known for its co-working office space business, charges monthly rents of roughly $1,900 per unit in four-bedroom apartments in New York. Its rent is $1,200 per month per unit in Crystal City, Va.

Its units are furnished and it offers a wide range of amenities in communal spaces, including happy hours, cooking and fitness classes and media lounges.

Mr. Shear, of Property Markets Group, says PMGx buildings will have community managers rather than the traditional front desk.

“It will be run more like a cruise ship than a hotel,” he said.

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