App-Based Management: Is it the Future?

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5 minute read

The co-living provider eschews in-person leasing agents and relies on apps that allow its “members” to reserve apartments and transfer between cities.

Brad Hargreaves founded Common to solve a problem.

Hargreaves, was working at General Assembly, a global education institution with campuses in more than 15 cities worldwide that he also co-founded, when he noticed a problem — it was difficult for students to find housing.

“The pain point for Brad was housing for employees, students and teachers,” says Sterling Jawitz, Head of Real Estate Partnerships at Common. “People were showing up with suitcases and nowhere to live. [Finding them housing] was a daunting challenge.”

To meet that need, Hargreaves developed Common, which designs, creates and operates all-inclusive homes in New York City, Chicago, the San Francisco Bay Area, and Washington, D.C. Common currently operates 15 homes across these four metropolitan areas. The goal was to produce shared housing while removing the usual sources of tension in roommate relationships, such as dividing utility bills and doing chores  “Our focus is to make the roommate experience better by removing those pain points,” Jawitz says. “That is done primarily through technology and hands-on property management.”

Common, a residential property manager, works alongside the developer as an advisor as they produce the purpose-built, co-living communities. Common enters into long-term property management agreements with a building owner, similar to what is found in the hotel industry where the manager only takes a flat rate management fee until a return threshold is met. Then he gets a percentage after that.

Common handles everything that traditional property managers do.

“We do everything on top of property management that is needed to provide co-living, whether that is construction and design, advertising and consulting services and providing furniture and equipment fixtures,” Jawitz says.

But the buildings Common occupies are not traditional apartments. The company primarily manages communities with three, four, five, six and sometimes more bedrooms that share common spaces, i.e. kitchens, eating and living rooms.

Common calls its residents “members.” A member pays a deposit and signs up to rent for a certain term at a particular building. And when members move in, they receive beds, linens, towels, a weekly cleaning for their space, and utilities, including Wi-Fi. The technology platform allows residents to do everything online, from applying for membership to making repair requests and paying their rent.

Residents can also organize community events online through a Slack channel.

This online platform provides Common with insight.

“We know when someone is moving out, we know where they are moving and we know what their budgets are,” Jawitz says. “We know when someone will move from New York to San Francisco. We use our visibility into our membership to maximize occupancy and keep vacancy as low as possible.”

High-Density Pricing

While Common’s services, linens, toiletries and perks are nice, they are not the ultimate reason people stay there. The main value proposition is that the company offers a nice building in a great location at a price point cheaper than its competitors. When you include brokerage fees, Jawitz says Common offers a 20 percent to 30 percent discount to the cost of individual living on a monthly basis.

“We drive down costs by focusing on larger units and higher density,” Jawitz says. “Through design and economies of scale, we are able to reduce costs to our members.”

There is not one set Common design, though the company started by retrofitting old brownstones. In addition, the company has retrofitted existing buildings, employed adaptive reuse and built new from the ground up.

“We try to be very flexible in the type of real estate that we go into,” Jawitz says. “But to really maximize returns, the majority of our pipeline skews toward ground-up development.”

Jawitz says Common generates cost savings with a lot of pre-development work. Its larger units have fewer kitchens and baths than traditional market-rate apartments. Both of those spaces add cost.

“We are more efficient on a square-footage basis than a typical studio or one bedroom or micro unit,” Jawitz says. 

So far, Jawitz says that Common’s strategy has been successful. The company is proving that it is more than just a short-term housing provider by inking approximately 75 percent of its “members” to year-long leases.

“That is skewing higher as we open up more properties,” Jawitz says.

In its almost three years of operation, Common is seeing a 70 percent renewal rate on those 12-month agreements.

Common is not alone in the space. Open Door launched in 2013 and WeLive, a subsidiary of co-working giant WeWork, is also active.

Still, executives at traditional apartment companies have doubts about the long-term viability of the roommate-sharing model. 

“At the end of the day, people would prefer more privacy than not,” says Eric Bolton, MAA’s CEO. “The only way the WeLive model [and other co-living models] takes is if you can create opportunities in expensive housing markets where you can offer a location that combines shared living space and offer it at a price that is much less than what they would otherwise have to pay to be in that area.”
Others think it might have a future, but that it will be limited to certain high-cost markets.

“In the right location, it could work if the rents are like New York and San Francisco,” says Ken Valach, CEO of Trammell Crow Residential. “Maybe you can do this for 30 units in Houston, but if you are doing 250 units the management part gets a lot tougher.”

But Jawitz contends that coliving has been around forever. The only difference is companies are now providing the service under a national banner.

“People have been living with roommates for essentially all of history,” he says. “To provide that great user experience and provide a national brand, you need to understand how to build that consumer brand and technology, and we feel like we’re ahead of the curve.”

Les Shaver, Senior Manager of Content at NAA