Why are co-living companies moving to smaller cities?

New Delhi: This market is moving, but in a direction it has never gone in years. Home rental and co-living companies are now moving towards tier 2 and tier 3 cities as they follow working professionals who have moved back to their hometowns. The pandemic has forced many to move out of metros as a cost-saving measure, and they are being aided by many companies extending work from home policy till the year-end.Nestaway Technologies, one of the largest home rental companies with over 60,000 homes across 16 cities, said that in July, the company has seen a 3X upsurge in owner requests from smaller towns asking to manage their homes. 78050741“We need to be where our tenants are. Pre-Covid, the tenant base was crowded in central business districts and a few busy areas in tier I cities. We see a tectonic shift in consumer behaviour now,” said Amarendra Sahu, Nestaway’s co-founder and chief executive.“With over 85% of tenants working in the knowledge sector, they now prefer far off locations and nearby smaller cities as rents are cheaper and they do not have to commute to work daily,” he added.Based on its internal migration and tenant exit data, Nestaway has seen tenant churn in line with the migration data.Experts say that with internet connectivity still an issue in some smaller cities, working professionals are taking co-living space in the nearest city to cater to the rising demand. “Apart from metros, the concept of co-living is gradually gaining traction in tier II-III cities owing to the rising young workforce and increased economic activities in these cities. Considering the growth potential in tier II-III cities, operators and developers are looking to expand in these cities and cater to the evolving demands of the young population,” said Anshuman Magazine, chairman and CEO - India, South East Asia, Middle East & Africa, CBRE, a global property consultant.CBRE said that going forward, the product mix and offerings by operators will witness a shift towards single and double occupancy rooms given the need and consumer preference for social distancing.Nestaway, which has seen three times upsurge in requests from owners from smaller towns, is eying cities like Vijayawada, Chandigarh, Indore, Jaipur, Agra, Indore, Nagpur and Ludhiana.“While our existing model works best in busy pockets of the city and offers a full-stack service to make living easier, post Covid, customers want less rent and fewer services. That is why we are taking the decision to add a franchised version of our services so that local entrepreneurs can customise it as per the need of customers in their geographies,” said Sahu.However, continuing surge in demand may create supply issues. “While there is demand in tier 2 and 3 cities for co-living centres, the quantum of demand for shared accommodations in smaller cities are not sufficient and feasible enough for large players to set up their centres,” said Archit Sood, managing director, valuation and professional services, Savills India.

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