Australia’s co-living sector is gaining momentum as housing demand, planning support and institutional investment converge.
What is co-living?
At its core, co-living is purpose-built, managed accommodation where residents have their own private room or studio but share communal spaces with utilities, furnishings and services bundled into a single fee.
As a product, it sits somewhere between conventional rental accommodation and more highly serviced forms of living such as serviced apartments and hotels, with an emphasis on flexibility, amenity and community.
Why co-living and why now?
Co-living is attracting increasing attention from developers and global investors and is now beginning to gain serious traction in Australia as an asset class in its own right.
For those who have watched the Australian build-to-rent (BTR) sector flourish over the past decade, the trajectory may look familiar. Co-living is moving from an “alternative” housing model towards a more established and mainstream living product. The question is increasingly not whether the asset class will grow, but how quickly and what form that growth will take.
The demand drivers are well understood, and co-living as an asset class is benefitting from macro and regional tailwinds. Housing affordability and rental pressures remain significant in all Australian major cities. Co-living provides another option for renters, including younger professionals, students, key workers, and people moving between different life stages who may want flexibility, community and a serviced living experience without the cost or commitment associated with a conventional apartment.
NSW has also provided a relatively clear planning pathway and has also benefited from the NSW Government’s Transport Oriented Development program. This emerging sector has led to the rezoning of land to increase density and boost housing supply. Co-living was formally introduced into the NSW planning system by the State Environmental Planning Policy (Housing) 2021 (Housing SEPP). The minimum lot size is 600m² on R2 Low Density Residential land and 800m² on other eligible land, and qualifying co-living development can attract a 10% floor space ratio bonus. By comparison, qualifying boarding house development attracts a 30% bonus, reflecting its affordable housing requirements.
Core living products in Australia (such as student, BTR, retirement, land lease) have benefited from a consistent flow of capital from on and offshore investors, but we are seeing global sponsors and institutional investors now actively allocate capital to co-living products. Investment in the Asia-Pacific living sector hit US$13.8 billion in 2025[1], and Cushman & Wakefield’s inaugural APAC Living Investor Survey showed that investors are allocating an estimated US$33.2 billion of capital to APAC living products alone[2]. Co-living is now the second most targeted living segment in the region, behind BTR and ahead of PBSA[3].
Australia's development pipeline reflects that interest and investment. Knight Frank puts the national co-living pipeline at more than 10,000 units, comprising more than 2,000 operational units, a further 4,159 under construction or approved and another 3,647 planned or proposed[4]. Sydney accounts for more than 90% of completed schemes nationally, while NSW accounts for 83% of the overall pipeline[5].
Where does co-living fit in the broader living sector?
Increasingly, the question for developers is not necessarily "BTR or co-living?" but what combination of living uses works best for a particular site.
The emerging pipeline demonstrates this ‘multi-use’ strategy. Freecity recently received development approval for a 548-home precinct opposite Rouse Hill Metro comprising 332 BTR apartments and 216 co-living studios. TOGA's proposed $553 million Five Dock precinct similarly combines 190 co-living units with 676 BTR and build-to-sell apartments.
The boundaries between traditional and non-traditional asset classes are also merging. Hospitality groups are moving into longer-term living products, while residential operators are experimenting with combinations of co-living, short-stay accommodation, BTR and other managed living models.
This points to a broader shift. Rather than treating BTR, co-living, student accommodation and hospitality as entirely separate asset classes, developers and investors are increasingly considering where different living products sit along the same living spectrum, and often in conjunction with other lifestyle amenities, such as childcare, retail and hospitality.
NSW Planning Position
Consent cannot be granted for the purposes of co-living housing unless the consent authority is satisfied that the Housing SEPP standards are met. This means it must:
- provide a primary place of residence for occupants and cannot be used for short-term tourist and visitor accommodation;
- comprise at least 6 private rooms;
- generally provide private rooms between 12m² and 25m², excluding private kitchen and bathroom facilities, with a 16m² minimum where a room is intended for more than one occupant;
- provide adequate bathroom, laundry and kitchen facilities together with adequate bicycle and motorcycle parking spaces; and
- have a manager responsible for implementing the property's management, with an appropriate workspace provided for the manager (the manager does not always have to be on site but must be contactable by phone 24/7).
The Housing SEPP also contains non-discretionary development standards. For example, a six-room development must provide at least 30m² of communal living space. For developments containing more than six rooms, a further 2m² is required for each additional private room. Communal open space must generally comprise at least 20% of the site area and it must satisfy certain floor space ratio, parking and minimum landscaping requirements.
These standards matter commercially as well as from a planning perspective. If a development complies with a non-discretionary standard, the consent authority cannot impose a more onerous standard for that matter.
Practical points for developers
Practical lessons are already emerging from the Australian perspective:
- Start with the operating model, not just the building. Co-living is an operational real estate product and requires the right management team and operating model. The legal and regulatory framework applicable to a particular development can depend on how it will actually operate, not simply how it is labelled. Management structure, resident arrangements, services, common areas and the degree of control retained by the operator should therefore be considered at the site-selection and design stages rather than after the building has been designed.
- Design for flexibility. The living sector is evolving quickly. Where planning, design and feasibility permit, developments that can respond to changing demand or accommodate different living products may be better placed over their lifecycle. The mixed BTR/co-living schemes proposed at Rouse Hill and Five Dock are early examples of developers thinking across living categories rather than within a single asset class.
- Bring capital and financing into the conversation early. Institutional appetite for living assets is increasing, but co-living remains a relatively young asset class in Australia. Financing, valuation and exit assumptions should be tested early, particularly where a project's feasibility depends on an operating model or income profile with limited local precedent.
- Think beyond development approval. For institutional capital, the development approval is only one part of the picture. Investors and financiers will also focus on the regulatory framework, operating platform, management capability, stabilised income and the ability to scale the model across multiple assets. Like any other living asset class, the largest gains will be realised by capital partners who back the right management team who have the right operational experience and can demonstrate a track record in careful asset selection.
- Get the structure right from the start. Where a co-living platform is intended to scale, separate the property-owning vehicle from the operating vehicle from the outset. Property ownership produces passive, long-term income, while the operating business carries the trading and management risk. Keeping the two apart lets investors back the property, the platform or both. It can also support a more efficient tax structure, keep operational liabilities away from the real estate, and keep exit options open. Making this separation later, once assets and investors are in place, is costly and often impractical.
Co-living depends on development, planning, construction, finance, investment and operations expertise. Developers and investors that understand that whole lifecycle rather than approaching co-living simply as another residential development will be best placed to navigate a sector that is developing quickly.
