Adult dorms is an answer to the growing housing process in big cities, such as New York City or San Francisco. And Venture capitalists see the opportunities in the area.
WeWork, a company that provides communal work spaces for those looking to set up shop in a temporary office, has translated the idea from work spaces to living spaces. The new units in the building the company offers a new kind of solution for young professionals in .
This is a new idea to rent rooms. The building presents “co-living" working style, where tenants can rent tiny bedrooms to shared amenities and the opportunity to live in a popular neighborhood costing less than a traditional.
"We’re not just going to give them the best price, which we will," says WeWork CEO Adam Neumann. "And we’re not going to just give them flexibility, which we will. But we’re going to give them a social layer of community that has never existed before."
Venture Capital funds, such as Maveron and Fidelity Investments are looking for targets which could grow fast in expansion and generate attractive profits. Startups, such as CeWork in real-estate sector might achieve the goal, unlile traditional investments in the same sector.
“You have this incredibly large category, which there’s not that much venture activity in, that needs to be reimagined,” said Jason Stoffer, a partner at Maveron, which is backing New York-based coliving startup Common.”
The opportunity is that the market is centered on the biggest problem U.S. cities experience: housing affordability.
There are challenges in the industry couldn’t be ignored. The economics of the business are tricky. To attract young workers, the prices have to be low enough for them. However, for landlords, the prices need to be high enough to profit.
In addition, there are other companies, such as Open Door based in San Francisco, take control of entire townhouses and rent out rooms. Open Door also wants to partner with developers on new apartments for the concept.
Startups and their investors are trying to find ways to gain a slice of U.S. housing spending. According to real-estate research company Zillow, renters between 22 and 34 years old living alone would have to spend 53% of the income in average to pay the apartment rent in the U.S.