Multifamily and co-living manager Common has announced one of its largest city expansions to date, with 396 new units under management across three different Philadelphia buildings: Common Frankford in Fishtown, Lincoln Square by Common in Southwest Center City, and Common at Broadridge in Fairmount.
Common has expanded its original co-living product into a centralized residential operating platform over the past year, serving both co-living and traditional multifamily product. The company entered the Philadelphia market with leasing and operations at Common Civic in February 2020 and, despite challenges from the pandemic, received 5,000 leasing inquiries and conducted 282 virtual tours in its first three months in operation. The occupancy of the building has averaged over 96% between July 2020 and January 2021.
Philadelphia’s second Common building, Common Frankford, is open now with 15 traditional multifamily units and 54 co-living units in three-bedroom unit types. Lincoln Square manager Alterra Property Group brought on Common to launch 36 three-bedroom co-living units earlier this year, and at Common at Broadridge, opening later this spring, Common will manage 42 furnished studios and 249 co-living units in two- and three-bedroom configurations. All three buildings are new construction.
Out of Common’s current 4,500-unit management portfolio, half are co-living units and half are traditional multifamily units. The company expects to have over 8,000 units under management by the middle of 2021 and is currently negotiating another 1,000 units in Philadelphia to come online over the next few years.
Multifamily Executive spoke to Common’s founder and CEO, Brad Hargreaves, about the company’s new management approach and the impact of COVID-19 on co-living as a whole.
MFE: In the year since COVID-19 started, how have your operations shifted?
Hargreaves: The second quarter, when everything hit really hard, was very challenging. We saw an immediate dip in occupancy—10% of our residents prior to COVID were here on a visa, and pretty much all of them left over the course of the second half of March, first half of April. Then we had to deal with the fact that we have a lot of essential workers on our team, getting them PPE, all the steps we needed to take to make sure our homes were operated safely.
As Q2 wore on and we moved into summer, we started seeing some of the benefits of our operating model, which we built initially for co-living and micro-apartments, but saw a lot of applicability outside of that. To give you an example of that, virtual tours have always been very core to what we do. Something that’s really important to understand about Common from a property management standpoint is that we have a central leasing office that handles all inbound inquiries … That central leasing functionality has been a real differentiator and a real lifesaver through the last nine months. And it’s let us really keep up our leasing pace. May, June, and July were all record-setting months for us from a leasing velocity standpoint, and we were able to return occupancy by the end of the summer to around 90% across both co-living and conventional units.
MFE: What does your portfolio look like today?
Hargreaves: By the end of this quarter (Q1 2021), we will have around 6,000 units under management. And a majority of those are not co-living, which is something people don’t really understand about Common and something we haven’t really talked about publicly. We have a significant presence in workforce housing under the Noah brand. That is one we’re really excited about, just given that workforce housing benefits a lot from a centralized operating model where we can have central teams of people managing leasing, handling tenant inquiries, and handling support tickets versus having two very overworked people on site do everything.
We’ve seen a lot of interest in that model, and we signed about 3,000 new units under management in Q4, and the majority of them were near-term deliveries, things opening in the next six months. And the majority of it is conventional apartments, not co-living. A lot of it was workforce housing, we signed a couple of more institutional Class A product, out-competing traditional management companies that have a more decentralized approach. So co-living, we’ve increasingly thought about it not as a standalone product necessarily but as a tool, one of a number of tools in our tool belt that we can use to maximize ROI and improve the performance of residential assets.
MFE: Has co-living’s full-service approach, including cleaning services, ended up as an appeal for renters?
Hargreaves: Absolutely. I think for most of the second quarter last year our leading ad copy was about the cleaning products we used, which I never thought we’d be running ad copy on Facebook and Instagram talking about that we use Clorox cleaning products. But suddenly, that became a big selling point, the fact that there’s going to be someone coming into your suite and cleaning it every week. And that I think drove a lot of the demand that we saw going into summer, when people were very thoughtful about keeping their spaces clean.
MFE: What is the near-future plan for Common’s business model and acquisitions?
Hargreaves: It’s the stuff that’s really straight down the fairway for us that we’ll continue to win, anything where the developer or the owner had a unique and innovative business plan. Particularly in the co-living industry, you’re going to see a lot of consolidation where a lot of deals are up for grabs … There’s a lot in flux right now, I think you’re going to see a lot of consolidation in the innovative residential space.
The second is just increasing our presence, competing against the big management companies. Our message to institutional owners is, if you’re going out with a new delivery building and you’re running an RFP with all the big players, give us a shot and see what we can do, putting a proposal together for that building. So right now it’s about getting on their radar for the more conventional assets and asking questions like, what kind of benefit does the central leasing model add to this asset? Are you going to get accelerated lease-up and higher rents by renting some of the larger units as co-living? Those are the questions we’re asking when we’re underwriting larger buildings, and we’re increasingly seeing and competing on those deals.
We’re really excited for growth in this coming year, and we’re going to end the year over 10,000 units under management, which we’re very excited about.
