As rents continue to soar in America’s most desirable cities, companies like New York-based Ollie (no, not that one… the other one) are angling to transform the real estate market with an updated version of an old model of co-living spaces.
Once all the rage (from the 1920s through the 1960s), co-living is back again. A slew of entrants from early-stage startups like Common, HubHaus, Pure House and Roam Co-living to better financed entrants like WeLive (from the multi-billion-dollar shared-office company, WeWork) and PMGx, are building businesses (and apartment buildings) to capitalize on the highly competitive and increasingly expensive problem of living for the city.
Ollie has its own spin on things. The company has designed its apartments to maximize limited space with high-concept design furniture and offers all of its tenants free Wi-Fi, premium television and fancy soaps in the bathrooms. Linen and maid service are included as well, making the company’s properties seem more like extended-stay hotels than rentals or shares.
Owned by Stage3 Properties, Ollie and its roommate-matching service Bedvetter garnered initial acclaim as the pilot project for New York City’s micro-living initiative, which was launched under Mayor Michael Bloomberg to try to take some of the sting out of the housing search for the audience of urban professionals that’s so critical to a city’s financial well-being.
Founded by brothers and former bankers Christopher and Andrew Bledsoe, the company has raised $15 million in financing to expand beyond New York and Pittsburgh, with locations in Los Angeles, Boston and Jersey City, NJ. The capital came from Aviva Investors Real Estate Capital Global Co-Investment Fund, in partnership with the Employees Retirement System of Texas. Additional investors include Currency M, the venture division of real estate firm The Moinian Group, and tech entrepreneur and real estate investor Justin Mateen (who was the subject of the Tinder lawsuit a few years ago).
“In the case of Ollie we’ve been going through the trends here which is reasonably priced affordable housing for people moving to cities,” said Russ Bates, head of Americas Global Indirect Real Estate, Aviva Investors, which invests with emerging real estate platforms focused on opportunistic real estate properties in the U.S. “Similarly, here with the demographic changes you have a complete demand shift in what people are expecting for their apartments.” Those factors made investment in Ollie obvious, he said.
The brothers Bledsoe launched the business to respond to a problem that’s become all too familiar to anyone who’s relocated to a new city. Finding an apartment is a nightmare. And an increasingly expensive nightmare.
America is still in the depths of a housing and rental crisis that shows no sign of letting up in America’s most desirable cities. There are more people renting now than at any point since 1965, according to a Pew Research report. And low housing starts for anything other than luxury properties mean that the rental market isn’t turning over, because there’s no affordable place for those renters to go.
It’s not clear that Ollie actually solves this problem. Tenants that can spend the money for one of Ollie’s micro-apartments can afford a place of their own in an up-and-coming neighborhood (which has its own cultural cache). And the draw of community and amenities hasn’t provided a spark for WeWork’s WeLive offering.
“We got into the space as consumers who recognized that there was an issue from a consumer perspective. My brother was doing international real estate and I was covering consumer product companies,” Christopher Bledsoe tells me. “I consider [real estate] a consumer product category. “It’s an asset class and it’s viewed that way [but] it’s a consumer product category that’s been hijacked by finance guys.”
Christopher Bledsoe, who was a consumer and retail analyst for Lehman Brothers before its collapse, sees Ollie’s offering of amenities and services through that lens. The $2,500 to $2,900 studios available at the company’s Kips Bay location come with things that the grey-market Craigslist apartment rental options can’t match.
And that’ll be true for the company’s other locations, as well.
“Affordability means being competitive with the underground housing market,” says Christopher. “It doesn’t include Wi-Fi, cable, bath amenities, linens getting changed… doesn’t include access to all the events that we organize… there’s a ton of hidden living expenses on top of these numbers,” for rentals. And there’s access to the community spaces and the gym, he adds.
In all, Christopher estimates savings of $1,500 when all of those perks are factored in.
Consider it all yet another example of the Apple-fication of industries. The brothers Bledsoe are taking a high-design approach that Apple used for consumer products and are applying it to housing.
“The furniture that we put in is high design and it’s beautiful, but we’re going with furniture that eliminates the wastage of space,” Christopher says. “What we’re perceived as is providing micro luxury and I embrace that. The idea that that’s pushing price points beyond what a consumer would have to pay for hidden living expenses for cost,” is inaccurate.
Paying for a furnished apartment, getting maid service, internet connectivity, cable, Malin + Goetz hand soaps, would arguably cost more, Christopher says — and buying furniture is ultimately a waste of money. “It’s a greener way to live and it’s a cheaper way to live,” says Bledsoe.
While all of this development is great for the twenty-something and thirty-something professionals that cities are falling over themselves to attract, the focus on luxury micro-living means that large swaths of the population are stuck in a housing dilemma that still has no solution.
So while innovation may be helping one class of consumers, the broader problem of affordable housing in America still demands the attention of some new innovators.