Australia’s co-living sector has reached a critical milestone.
National supply has now passed 10,000 units, including completed, under-construction, and planned projects, according to Knight Frank’s The Co-Living Report.
Following a breakout 2025, developers and investors are gearing up for another surge in 2026 as demand for affordable, well-located housing continues to climb.
John-Paul Stichbury, Knight Frank Partner, Living Sectors, said last year had been a turning point for the sector.
“We saw a huge amount of interest over the course of the year,” he said.
“It's been a period of education in many aspects, with new participants coming into the market and learning more about how the sector operates.”
Sydney Sets the Pace
Sydney remains the undisputed centre of Australia’s co-living market.
More than 90% of completed schemes are located in the city, with 1,639 units currently operating.
Mr Stichbury said planning reforms had been the key catalyst.
“This stems from the changes introduced in 2021 by New South Wales, which established a clear co-living pathway,” he said,
“That has provided certainty for investors and developers to bring schemes forward.”
He also pointed to strong investor appetite and a growing body of performance data from first-generation assets, which has helped support larger-scale underwriting.
Elsewhere, momentum is building slowly.
Around 1,110 units are now in the pipeline across Victoria, Queensland, and Western Australia - still modest, but enough to signal growing interest.
Mr Stichbury said it was a case of planning catching up in these states.
“It’s just a matter of time,” he said. “Engagement with developers is increasing, and eventually we will see more of this product type across the country, which is very positive.”
Bigger Buildings, Bigger Backers
Developments are increasing in scale in line with rising investor confidence.
Completed schemes currently average 37 units.
However, projects under construction now average to 60 units, developments with approval 78 units, and proposed projects 130 units.
These larger schemes deliver operating efficiencies, stronger cashflow, and faster portfolio growth.
Mr Stichbury said the shift reflected broader global investment trends, particularly in response to persistent housing shortages and undersupply in major cities.
“Alongside build-to-rent and student accommodation, co-living is the newest format and caters to a slightly different market,” he said.
“This product type - professionally managed, larger-scale, and high-quality - is meeting strong demand.”
A Two-Speed Market Emerges
As the sector matures, a clear split is emerging, according to Mr Stichbury.
While institutional capital is driving the upper end of the market, private investors continue to underpin activity at the smaller scale.
Mr Stichbury said smaller projects were attracting a diverse investor base.
“We’re seeing some high-net-worth individuals, small property companies, and family offices looking for slightly higher yields than traditional residential unit blocks,” he said.
“It remains a very active segment, with a healthy pipeline of sub-100-unit schemes coming through.”
Demand Remains Strong on Price and Location
Tenant demand remains the engine of growth.
Affordability, access to transport, and proximity to jobs and amenities continue to draw renters to the model.
Knight Frank’s report found that co-living units in Inner Sydney achieve an average all-inclusive rent of $675 per week, compared with $730 to $880 for similar private apartments.
The tenant base is broad but youthful. Nearly 90% are aged 20 to 40, mostly working professionals, with around 10% aged over 40.
Mr Stichbury said the model was well-suited to the growing cohort of single renters.
“Co-living caters particularly well to singles, offering a higher volume of studios in places people want to live - close to transport, amenities, and jobs,” he said.
The quality and convenience of newer schemes were central to their appeal.
“The product itself is often new, high quality, efficient, and all-inclusive, with furniture bundled into the rent,” he said. “It is a very easy product to move into and really caters to the modern renter.”
Flexibility is also emerging as a key differentiator in a tight rental market.
“There is very little intermediate stock, such as three to six-month tenancies, available elsewhere,” he said.
From Niche to Mainstream
Mr Stichbury said the strong foundations laid last year were now translating into sustained investor confidence.
“We are really building on the success of 2025,” he said.
“I anticipate even more interest in co-living in Australia, with Sydney remaining the focal point and other cities gaining momentum.”
The next five years would likely see the sector enter a new phase of expansion, marked by larger projects, deeper capital pools, and growing geographic diversification.
“We will see the first institutional-scale schemes begin construction in Sydney,” he said.
“There is a large pool of capital looking to enter the market. This will ultimately drive supply, which is very positive for the Australian housing market.”
