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Property Developers Balk at Co-Living Firms

It looked like a perfect match: a 235-unit apartment building planned for San Francisco's hot South of Market neighborhood and WeWork's millennial-friendly co-living division, dubbed WeLive. But WeWork's efforts to lease the proposed building last year unraveled for an all-too-familiar reason—a banker got skittish.

The project was different from the typical residential development. Rooms would be only 250 square feet on average but there would be communal kitchens and lounges on each floor to cater to the city’s influx of young workers. Lenders to the building project, under development by real estate developer Build Inc., decided the unusual nature of the project made it too risky to finance, according to Build President Lou Vasquez. The developer ended up scrapping its original co-living format and instead opted for traditional apartments.

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“Developers have been dealing with the fact that their product doesn’t meet the market,” Mr. Oetting said. “To be frank, many of them are straight-edge, rich white guys but interested in the idea of ‘how do I rent to three couples in the same place or five people who are all friends and will move in?’”

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“The Achilles’ heel for the co-living product right now is it’s unproven...They’re a startup, no matter how well they’re doing. They’re not Google.”