Gap of 47,000 German student apartments to be filled

The alternative asset category of Student Accomodation has almost become mainstream in Germany over the last couple of years, shrugging off its label as an exotic sub-species as more funds see the potential in the sector and learn from developments in other markets, particularly the US and the UK. We have reported on activity in the sector in Germany since its inception about six years ago, but new market entrants and greater understanding of the opportunity has seen the sector almost coming of age.

Property advisor CBRE recently teamed up with German student housing firms YOUNIQ and International Campus AG to produce a first Market Report on Student Accomodation, which it presented to the business press recently in Frankfurt.

The study concludes that around €4.1bn of new investment into student housing is required to provide 47,000 additional student apartments in Germany’s 61 university towns with more than 8,000 students over the next few years. Outside the larger urban centres, where students have to compete with normal workers for scarce accommodation, the cities of Münster, Freiburg and Karlsruhe offer among the best prospects for new ventures, says the study.

The CBRE study sees excellent conditions for investing in this niche product, bolstered by the stable situation on the overall German housing markets and continued high demand for small apartments. Rising student numbers and a shift in demand from large shared accommodation was also helping to underpin the demand for more individual housing options for students, it says.

In a brief presentation on the sector’s and his company’s plans, International Campus AG chairman Horst Lieder commented, “The forecast of the conference of culture ministers on first year student figures for 2012 is now already being significantly exceeded. We are therefore expecting growing student numbers, which will further boost demand. As such, the demand shown by CBRE for almost 50,000 additional high quality apartments will see a further significant increase in the coming years.”

The new report aims to offer a guide for investment decisions, allowing direct comparison of the relevant locations, said CBRE. The locations with the greatest long-term potential are Munich, Hamburg and Frankfurt, where a pressurised general housing market already struggling to cater for its normal populations is accompanied by only few student halls, said the report. Outside of the large urban areas, Darmstadt, Münster and Giessen display highest demand for high quality apartments.

Traditional university towns such as Göttingen and Marburg only reach mid-range places in the investment potential ranking due to heavy dependency on the ‘impoverished’ student population, with little other support. Karlsruhe, Münster and Freiburg, on the other hand, show attractive socioeconomic figures, a strained housing market, no vacancies and relatively high rents, above the €8 mark per sqm per month. In the East, Berlin, Potsdam, Dresden and Jena also perform well, reaching the upper half of the ranking.