In this week’s episode of the Propcast, Louisa speaks with Brad Hargreaves, CEO and Founder of Common, a residential brand creating a better kind of multifamily property manager through innovations in technology, design, and operations. This episode covers the differences between the UK and US rental markets, and how co-living has taken off in US markets and what this might mean for the market in the UK and Europe.
Click here to listen to this episode when it’s released on 3rd November!
Keywords: co-living, capital, affordable housing, shared housing, multi family, build to rent
Brad Hargreaves is the Founder and CEO of Common, the nation’s leading residential brand that designs and manages multifamily apartments with more than 6,000 residents in over 10 markets across the country. Before founding Common in early 2015, Brad was the co-founder of General Assembly, a global education institution with campuses in more than 15 cities worldwide. As part of the General Assembly founding team, Brad led the growth of the company’s education business from its launch in 2011 into a global institution with over a dozen campuses. Most recently, he was a Venture Partner at Maveron, General Assembly’s lead investor. Brad has been named to Ernst and Young’s 2020 “Entrepreneur of the Year” award; Vanity Fair’s “The Next Establishment”; Business Insider’s “Silicon Alley 100”; and Crain’s 2017 “40 Under Forty.”
Common is a residential brand creating a better kind of multifamily property manager through innovations in technology, design, and operations. Common delivers exceptional experiences for renters across twelve cities and nearly 7,000 units in coliving, microunit, and traditional apartments. They are the preferred choice for both residents looking for a stress-free and all-inclusive living environment from a trusted brand, and for real estate owners seeking reliable, above-market returns. The Common platform also includes workforce housing management brand Noah and family-first operator Mily. With over 20,000 units signed and under development and over $110 million in venture capital investment, Common is expanding into 22 cities across the world. To work with us, visit our partners page or follow us on instagram at @common.living.
Louisa started her career in property working at a well-known estate agency in London. Realising her people skills, she moved over to Lloyd May to pursue a career in recruitment. She now is a Director at LMRE, who are a specialist recruitment firm driven by PropTech and recruitment professionals, and Louisa oversees their 5 core areas. Louisa co-founded LMRE and provides a constructive recruitment platform to the new disruptors in real estate. Louisa is also on the board of Directors at UK PropTech Association (UKPA).
LMRE believe there is a better way to recruit. LMRE focus on a more comprehensive, client led focus delivering exceptional talent to the place at the time. They are passionate about the industry and passionate about people’s careers. LMRE spend time with each client to become and an extension of the business, and their transparency and core values help them grow with the sector. LMRE simplify recruitment and innovate with our clients and evolve the people driven, PropTech community.
General Assembly https://generalassemb.ly/
Student Hotel https://www.thestudenthotel.com/
Louisa: Hi everyone. And welcome to the Propcast.
On today’s show, we will be examining what the future of residential looks like. And I will be asking the one and only Brad Hargreaves, the founder and CEO of Common all the questions which you want answers to.
So thank you so much for joining me today, Brad.
Brad: Thank you so much for having me on the podcast and excited to be here.
Louisa: Beautiful. Now on today’s show, we’ll be discussing what co-living really is, what renters look for and how the market is changing. And oh my, has it changed a lot in the past few years and who knows what’s to come.
Brad will be the one to answer these nitty gritty questions.
We’ll be also chatting through the MNA space which Common has been involved in, launching it to markets and continents, which is super exciting and finishing off with what the future of residential looks like.
But first, before we delve into these questions, a quick introduction to Brad and his business Common, which is the nation’s leading residential brand, that designs and mandates multi-family apartments with more than, is it 6,000 residents? Across 10 markets in the US and soon to be the UK? Is that right Brad?
Brad: Soon to be the UK. I think we’re above 7,000 now in the US.
Louisa: Oh so I was 1000 off. Sorry about that. Before founding Common in early 2015, Brad also co-founded General Assembly, which is a global education institution with campuses in more than 15 cities worldwide.
Most recently he was a venture partner at Maveron, General Assembly’s lead investor, and Brad is also a bit of an A-lister. He has been named Ernst and Young’s 2020 “Entrepreneur of the Year”, Vanity Fair’s “The Next Establishment”; Business Insider’s “Silicon Alley 100”; and Crain’s 2017 “40 Under Forty.”. You don’t look a day past 30 by the way, Brad.
Now we’ve given the audience an introduction, let’s start the questions. Talk us through your journey to founding Common and tell us a little bit more about the product as well.
Brad: Thank you. And, I start off by saying I’ve always been really excited by industries that touch both the physical and digital worlds. Never really satisfied with just being on one side or the other. But think that really special and magical things can happen when you combine the two.
Prior to Common, I started what became the largest technology trade school in the US called General Assembly. And we really focused on skills like web development, UX, design, data science, digital marketing, which we think of as 21st century high skilled trades.
And we grew that business to around 20 cities, with brick-and-mortar campuses, heavy online flipped classroom component. One thing we saw while doing that is that many of, not just our students, but our instructors, our employees would really struggle to find a quality affordable place to live in those cities.
We were in locations like New York, San Francisco, DC, Los Angeles. We opened a campus in London and Hong Kong, and the housing challenges were always at the forefront. When we would hire an instructor and they would move to a city, they would often look for a room as opposed to a full private apartment.
And it really cued us in to some of the, frankly, opportunities to create types of housing that were designed for these different uses. So whether it’s smaller private spaces, more shared spaces, live workspaces. And so we built Common as an operating platform and a design firm that was really geared to innovative build to rent models. And so in the US you have, and I’m happy to get into some of the distinctions between, the American and the, and the UK rental sectors. But you have a really robust built to rent sector in the United States. Multi-family here. We’ve got 40 million rental apartments in the US and it’s almost all purpose-built rental.
However, there’s not a lot of differentiation, in the new buildings that are delivering. It’s pretty much all studios, one bedrooms, two bedrooms. And so we looked at this and said that there’s, there’s a broader range of options that serve Americans of all types.
So we started doing co-living, which in our vernacular is shared apartments.
Louisa: What is your definition of co-living?
Brad: So for us, it is multiple bedrooms that are private around a shared common space. And we are also doing more micro apartments, so units with individual kitchenettes and bathrooms that open into lots of shared amenities spaces in the buildings.
So, we really specialised off the bat on those two typologies that led to a lot of growth that also led to more work with institutional partners, larger owners and developers, which actually now, if you look across Common today, we’re managing, both have conventional private apartments, as well as co-living and innovative units.
So across the 7,000 units or so we manage today, about half are co-living and the other ones are more conventional setups. And there we’re approaching it on more of an operational, lens toward innovation, like, running robust communities, providing more opportunities for tenants to connect.
We’re also centralising some set of operations that make the building run more efficiently. So things like lease administration, credit checks, background checks, customer support, inside sales, block opportunities to get efficiencies, lower the cost of operations by centralising those. So, there’s a broader platform today beyond just co-living, but, that is probably the most exciting thing we still do.
Louisa: With all these extras of your platform – community building, you mentioned. Obviously credit checks. Is this all in house? Do you have some external partners which you work with?
Brad: Yeah. So we’ve been very focused on building a vertically integrated property management. So we do everything. What we don’t do is development and ownership.
So we are not going out buying buildings and titling sites, co GP’ing projects. We would be competing with our clients
Louisa: Leave that to the developers.
Brad: Currently, I mentioned we have 7,000 open. We have around 22,000 signed and under development. So currently in some stage of construction and we wouldn’t have that, we wouldn’t be able to achieve that scale if we were going out and buying every site ourselves and the neutrality that we have, where every one of our buildings is a third-party management contract. It’s a really strong value proposition for us.
Louisa: One less thing you have to worry about. And that sounds like it’d be a lot more expensive.
So last few months things are picking back up, going back to the new normal. Everybody’s talking about the pandemic. I’ve seen lots of, I guess, not just students live in your accommodations and professionals. H ow did that sort of affect your business?
And you’ve obviously still carried on growing you, then we’ll go into acquisition you had. Were you hit badly? It doesn’t look like you guys were somehow.
Brad: It’s been an interesting past 15 to 18 months. I would say there was an initial shock of our renter base, for instance, probably 80% that pretty much disappeared in mid-March of 2020.
These are people who were here on a visa, who were staying not on a 12 month lease on something shorter. But the majority of our residents were here longterm. Our thoughts around value proposition for the customer have always been for co-living for micros in particular, have always been really centered on affordability.
Community is important. It’s a great value add. The experiences is key.
But if you’re not offering real value it’s going to be very difficult to scale. And it has to be anchored in affordability versus a studio or a one-bedroom apartment, and a similar quality building in a similar neighbourhood.
So that really helped us through the pandemic because affordability was always in demand. The idea you can rent a room in a great neighbourhood for $1100, $1200 a month, that never stopped being exciting for people. So even though there were operational challenges – we had to ramp up cleaning, we had to provide more shared goods, we provide shared kitchen and bathroom supplies.
Now, suddenly people are in our buildings 24/7, going to the office every day. So they’re living, they’re working, they’re doing everything in our buildings that was a real change and we had to adapt to that.
But, overall there’s been a real positive shift for us, particularly on the ownership side. More owners are thinking about how can technology, how can innovative marketing drive performance of my assets. I think prior to COVID, sometimes it was hard to get attention from owners and get them to hear us out on how we’re doing marketing, how we’re doing sales, how that’s different, when their buildings are 98% occupied snd they’re driving 3-4% refill. Now suddenly they dropped to 80% occupied and they’re looking for other solutions. That’s been a big driver of growth.
Louisa: And so I presume the extra amenities that you provide, the sort of community, all these other plus ones, are tenancies longer for you than the average tenancy as well?
Brad: Yeah. We’ve always been focused on longer-term stays, The “co-living products” that got hit the hardest through the pandemic were those that were more dependent on short-term stays. For us, and this is just kind of anchored in how we think about ourselves as a management business, the majority of members are here on 12 month leases. They are here long term. And I think that gave us a lot of stability through the pandemic. We didn’t have to backfill our entire membership last summer. So our occupancy was back up into the 90%’s last fall and we’ve been continuing to trend positively since then.
I think the focus on long-term stays was a really, really positive thing for us. And it’s something we’re committed to going forward.
Louisa: Yeah, well, no doubt as your brand gets even stronger your tenancies will getting even longer. So fingers crossed for that. Now, you’ve done an acquisition as well.
Congratulations. But I think in your space, I think particularly there’s not too many dominant businesses, obviously I would say yours is.
Congratulations. So you acquired Starcity, who acquired Ollie, or did you also acquire Ollie? Talk us through it and, and took us through the reasoning behind this sort of M&A, which is so exciting.
Brad: Thank you. So there’s been a lot of consolidation in the co-living sector, particularly with the past six months. So the first one that happened is Ollie, which was a US-based co-living operator, they’re West Coast based. Starcity was unique in that they also developed, so they had a number of land sites that they had acquired.
They were in the midst of the planning process. So they got hit. They were doing a lot of very innovative things. They were probably our largest competitor in the United States. Really the double whammy from COVID. They obviously got hit on the management side from an occupancy standpoint, but, the bigger hit was now suddenly it was impossible to finance new residential properties.
So if you were stuck with landholdings ready to be financed, that was a really, really challenging position to be, because you couldn’t cover the leverage. And so that’s the position they found themselves at the end. Really a couple of months ago and, started talking to us and we ended up acquiring their management contracts, not the landholdings. We don’t want to end up in that business. We ended up acquiring their management contracts and we’re really excited to take those new homes on.
Louisa: Yeah. Awesome. Congratulations for that. And obviously to acquire another business, you have to have the capital. Talk us through your fundraising you’ve been doing as well.
Brad: Absolutely. So we’ve been very focused on finding investors that are aligned with the long-term mission of Common. And this is huge opportunity to create better ways for people to live and be innovative in the residential sector. We want to make sure that we’re aligned with investors that get that and are betting on the time horizon we are.
So we actually, recently raised our series D from a European growth fund. Their name is Kinnevik, they’re Stockholm and London base. They’re a publicly traded growth equity firm with about $18B in assets under management. And I love them because they’re a balance sheet investor.
They’re not a fund. so their target hold period is between 10 to 15 years, which is really aligned with how we think about our mission and how we think about the growth and trajectory of Common. It was a really great partnership they invested about a year ago and put $50M in total, which has really enabled our continued growth.
Louisa: Yeah, no, definitely. And I guess lots of our listeners vary from being obviously the investors, the technologists, the real estate folks. Obviously lots of people have gone through the phase of acquiring companies and also hiring then integrating old staff.
How have you sort of maintained culture, something so important? You talk about sort of community, but what about like internal community in Common? Any sort of tips for our listeners listening and how you maintain that as well?
Brad: Yeah, absolutely. And I would say the Starcity acquisition from a people standpoint, I believe we brought on 18 employees from Starcity.
So it was relatively small, where at Common we’re around 300 in total. The bigger challenge face is how do we maintain a strong bond and relationship between the field and corporate. As we’re about 50/50 right now, about 50% of our employees are building level – porters, maintenance, techs, leasing agents, and about 50% are corporate, which range from our inside sales team, our leasing administrators, all the way to executives, architects, and designers.
So how do we create career paths for people in the field move into corporate? How do we create better bonds where there’s empathy, on the corporate side for the field. We actually returned to the office pretty early. We got back to traveling pretty early, partially because half our employees are essential workers.
They never stopped going to work. And so just having that alignment and shared empathy in the organisation between field and central is really fundamental challenge from a people standpoint, as we grow in scale. And I think that really. overwhelms at this stage any other cultural challenges we have.
Louisa: When you go finally launched in the UK, whenever that is, no one quite knows. You’re working on it. I guess maintaining that culture when it’s across seas that’d be even more of a challenge, but, you don’t have to face that challenge just yet. But, you’ve obviously done a bit of research between both markets.
What’s the difference in the markets? Obviously we know the US as you said, has been very much a leader in the multifamily space. We’re trying to learn from you, different sort of markets. Is there any sort of major trends you’ve seen between US and Europe?
Brad: Absolutely. So it’s been really interesting to look at the various European players adapt different models, different takes on it. And then some US players such as Greystar, begin to enter the UK as well. So, we’re paying a lot of attention. I mean, Quarters I believe sold their European operations and wound down their US managing two of their former buildings, one in Chicago, one in DC.
So unfortunately some groups fell by the wayside. We look at the Student Hotel as being kind of a mix of uses that you would never see in the United States. The US has pretty strict separation of uses and zoning regimes.
And you don’t have quite that level of rigidity in Europe, which I think is super interesting. It’s not rare to see buildings that are a mix of student housing and multifamily or multiple hospitality, which is pretty rare in the United States. So there are certainly ways where Europe is ahead of the US I would say, in terms of liberalising zoning and, allowing more innovative, mixed operations and mixed uses.
But think for us, in the US, it’s funny. Multi-family is seen as the most stable real estate asset class there is. It trades at lower cap rates than any other type of real estate assets. And it is really seen as a safe haven. Even performing quite well through the pandemic writ large.
Whereas in Europe, build to rent is still seen as kind of this niche, emerging asset class. And one funny illustration of that is student housing cap rates in the US trade at a significant premium to multifamily cap rate. So it’s 50 to a hundred bps usually, cap rate spread, where student housing has seen as riskier. In Europe, that’s flat the opposite.
And so I think there are some fundamental reasons why that is, the locations of universities in Europe versus the US. I don’t need to get into all that, but it does feel like a real market discrepancy, a market inefficiency where the same type of asset is valued in a relatively, totally different way, in Europe versus the US. I have to believe that that’ll, revert to a mean over time.
Louisa: Sure. Before we get to the LMRE part, the next question, it’s very big question. And it’s what does the future of residential looked like, so let’s just focus out from like a US standpoint, because it sounds like the European market, we got a hell of a lot more research and learnings to do before we start drawing parables. Have you got any predictions, with your crystal ball, coming up in terms of your space at your end.
Brad: Absolutely. So I think we’re going to continue to see capital flooding into the build to rent sector.
You see the kind of volume of capital looking for return out there yields are compressed everywhere. So I think you’re going to continue to see a really high bounty on new build rentals and continued demand for new build rentals, both on the single family home side, as well as on the built rent purpose-built, multi-family side.
You’re going to see even more competition for these deals, even more capital flooding in. And I think it will be really interesting to watch how planning departments, how the councils react to this and an order of magnitude increase in the number of proposals that are going in the number of new schemes as more international capital, that’s looking for turn that sees strong returns, in Europe floods in. And I think there’s a couple of regulatory implications that will flow from there you’re seeing play out in some countries on the continent now.
Louisa: I’m sure you’re excited for those to come into play.
Well, we’re coming to the end of the Propcast. What happens is that we do the LMRE part. L is the main lessons learned and your career. M is mention anyone or a product you’d like to give a shout out to. R is what’s the most rewarding aspect of working in PropTech, or say co-living, if you want to narrow it down. And E is what are you most excited about in terms of the space?
So kickstart with what is some biggest lessons you’ve learned, and if you’ve got two it’s fine, I’ve got about a million.
Brad: I read this the other day and I think it maps perfectly to the real estate industry, is that you generally overestimate what you can do in a year, but underestimate what you can do in 10 years. And I think that speaks incredibly true to the real estate industry, which is not fast moving. But when it moves, it can do tremendous things.
So, you look back on kind of the arc of co-living and the arc of these innovative typologies in any given year, there’s not a ton going on, but then you look at where we are today versus where we were 10 years ago. And it is fundamentally different. I mean, the build to rent sector in the UK, co-living in micros in the US and these sectors really have gone through a watershed over the past 10 years.
So I would encourage anyone getting into real estate to really take the long view of it. It is an industry that rewards the long view, and that is really something that from a capital standpoint, from an ownership, from a leadership standpoint, we try to hue hard to here at Common.
Louisa: Awesome. Thank you for that, Brad.
And okay. Now it’s time for you to give, someone or a couple people, a couple of businesses, a shout-out.
Brad: When I think about who I really want to win from Common, I think about people who bet on us very early. And that’s not necessarily back five, six years ago when we were getting started.
Although obviously I have a lot of love for those folks willing to support us as we continue expanding our business.
So, I’m going to give a shout out to Brian Lee, who was our boots on the ground, over in the UK, really helping set things up, or Common in London.
He flew over in June kind of on one of the first flights they allow and has kind of been there by his lonesome, getting everything set up and working,
Louisa: Well if he needs a friend for a drink in the pub I’m around! Now what about the most rewarding part of working in the space?
Brad: People live in our product and, it’s hard for me to explain sometimes to people who come from technology, a piece of software or, a product or something like that. I don’t want to diminish that, but it is really the level of impact we can have on people’s lives is really extraordinary given what we do.
And it’s one reason we started our Noah brand earlier last year, which is focused on more ageing workforce housing. So buildings are typically 30 to 50 years old, that are affordable, either due to subsidy or due to just their age and location.
And you have a lot of families that live in these developments. You have a lot of retirees, you have people whose lives can be positively transformed if they’re operated well. That’s something that really speaks to why I get up every morning and the fact that people live in our product is a really strong motivator.
Louisa: We are having a direct impact. I like to think we do a similar thing here at LMRE and try and find people, because like you said, you spend most your time either at home or at work doing the job. So that’s what gets me up in the morning, but like every recruiter I’ve done the occasional placement that’s not worked out and it does actually hit home. We do have moral compasses, surprisingly.
Okay. And last question for you is E, what are you most excited about for the future of this space?
Brad: I would say, I hear this a lot when I talk to people in the UK and you mentioned it as well of like, “oh, the UK rental sector is in many ways at a much earlier stage than the United States.”
And that’s certainly true. But I see a lot of really innovative uses of space outside the United States. What’s some of the some of the mixed use projects I mentioned in Europe, some of the ways, different micro unit typologies, co-living technologies are being used in Europe and I’m more excited, I would say on a broad scale of countries and cities learning from each other, and the ability for countries and cities to look at what works in one place and bring it to another.
Whether it is the UK learning about purpose-built rental from US operators, or the US learning from some of the really interesting kind of mixed-use schemes that you see in the UK and on the continent. I think you’re going to create better products and ultimately better ways for people to live when you’re taking experiments that were run in one place and bringing them to another.
So when I think about Common as a global company, I never want it to be siloed where the people in the UK do their thing, US do their thing, people in APAC, they’ve got something going on. It should be shared learning.
Experimentation, importing those learnings from place to place to improve people’s lives. Lower the cost of construction, and ultimately create more housing at an affordable price.
Louisa: Which everyone loves living in as well. Thank you so much for your insights and I guess tips of the trade as well.
We’ve come to the end of the Propcast, but I’m looking forward catching up with you after the show. And, thank you again, Brad.
Brad: Thank you so much