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“We’re doing a number of things where we are trying to provide affordable housing,” Michael Cooper, president of Toronto-based Dream, said by phone. “It’s a big issue.”

The tower, slated to be completed in 2022, is part of a 34-acre $1.8 billion project that Dream is developing in Canada’s capital, Cooper said. About 25 per cent of the tower will be communal units.

European Model

Communal living has been growing in Europe and the U.S., with firms like Germany’s Medici Living Group investing more than 1 billion euros to fuel expansion. The living arrangements, which resemble upscale student residences, are gaining traction among mobile millennials who don’t want to accumulate belongings, can’t afford the soaring rents of many cities and like the instant communities they create.

Cooper said it’s a win-win for renters and developers: cheaper for those who can’t cover the cost of an entire apartment, and more rent per square foot for property owners.

“If people have all of these activities right within their building, they’re going to be much happier,” Cooper said. “We’ll be able to drive better returns in this model than we would with a traditional apartment.”

Rental Premium

Co-living units have provided between 20 per cent to 30 per cent premiums in Common Living’s other projects in the U.S., said Jake Chai, director of international real estate at the New York-based firm. It’s especially attractive to developers in a market like Canada, where yields have been tight as property values, land prices and construction costs have soared, he said.

While Canada has seen smaller startups and operators experiment with co-living concepts, Dream says it’s the first big developer to delve into the space in the country. It’s looking at opportunities to expand its co-living portfolio.

New York-based Common announced a US$300 million-plus expansion in April to Philadelphia, Pittsburgh, Atlanta and San Diego. The shift to Canada will be Common’s first foray outside of the U.S. It’s currently negotiating a pipeline of more than 500 bedrooms with developers in Toronto.

Bloomberg.com