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A typical German micro-living apartment
Germany’s micro-living market continues to post strong occupancy and rental figures, but pressure is building under the surface. With vacancy management growing more difficult, rent defaults creeping upward, and regulation looming, institutional investors may need to reassess both their pricing strategies and legal exposure in the months ahead.
Typically ranging from 20 to 35 square metres, micro-living units are compact, fully furnished apartments designed for single occupancy—often aimed at students, young professionals or mobile workers seeking flexible, urban accommodation with all-in pricing.
According to the latest market report from bulwiengesa and the Micro-Living Initiative (IML), the segment maintained a robust 95.6% occupancy rate across 128 surveyed properties totalling 28,300 residential units—70% of which are located in Germany’s A-cities. The average all-in rent in April 2025 stood at €599 per month, up 2.6% from autumn 2024. New-build micro-apartments fetched a higher average of €660, while premium units in prime locations reached top-end asking rents of €1,465.
Letting pressure grows on premium units
The figures suggest a sector still benefiting from structural urban demand. Yet behind the headline stability, letting challenges are mounting—particularly in the upper price bracket. Three-quarters of operators now report difficulty renting out high-spec apartments commanding all-in rents of €765 or more, up from 61% six months ago. Overall, 42% say they struggle to achieve sufficient occupancy, nearly double the figure reported in autumn 2024. Defaults are also increasing: 42% of respondents now find them a significant issue, compared to just 15% in the previous survey.
Much of the strain appears linked to asset quality and turnover friction. Roughly half of current vacancies stem from deficiencies in furnishings or fittings—raising the stakes for operators on refurbishment cycles and vacancy management. The study recommends shortening the transition period between tenancies to improve cost efficiency, particularly where units are frequently let on six-month terms or longer.
Despite the operational headwinds, investor sentiment remains cautiously committed. More than 60% of surveyed IML members say they remain open to further development or acquisition of micro-living properties. Expected annual rent growth of 2–4% through 2028 is seen as achievable, if moderate—suggesting a view of the segment as mature, yet still bankable under the right conditions.
The IML currently comprises 14 member companies: aam2core, Berlinovo, City Pop, Commerz Real, Cube Life, DEMIWO, FU.Life, Greystar, HanseMerkur Grundvermögen, i Live, Krams Immobilien, REOS, talyo, and Union Investment. The group was founded in 2020 as a platform for owners, operators and managers of micro-apartment buildings, with the aim of increasing transparency in the segment and fostering professional standards.
Regulatory risk rises with coalition deal
The politics of furnished rentals may now present a more serious threat to the model than occupancy rates or pricing pressure. In June, the newly signed coalition agreement between CDU/CSU and SPD introduced a clause signalling tighter rules on index-linked rents, furnished housing, and short-term rentals in tight housing markets. The wording remains ambiguous, but the political direction is clear. Policymakers are increasingly sceptical of rental models that appear to circumvent existing caps by charging premiums for furnishings or offering mid-term lease structures.
The Bundesverband Micro-Living (BML) has sharply criticised the plans, calling them a “devastating signal” to investors and tenants alike. Chairman Michael Vogt argues that furnished business apartments and student flats do not compete with family housing and serve a defined, undersupplied need. Regulating them, he warns, will only undermine the construction of tailored stock and deter both institutional and private capital from investing.
This isn’t the first time regulation of the segment has been floated. Previous Bundesrat-level proposals in 2023—spearheaded by Hamburg and Bremen—sought to mandate clearer itemisation of furniture surcharges and revoke rent cap exemptions for contracts over six months. At the time, the SPD’s Karin Pein stated that “we must not allow the rent cap to be circumvented through furnished rentals or short contract terms.” While that push stalled, the sentiment has since gained traction at federal level.
For institutional investors, the message is mixed. On one hand, micro-living still delivers solid income in constrained urban markets, backed by high occupancy and moderate rent growth. On the other, the segment is bifurcating: mid-priced units continue to perform, while premium product faces leasing friction and rising defaults. Meanwhile, regulatory headwinds are strengthening. If Berlin follows through on plans to clamp down on furnished rental pricing, the implications for underwriting assumptions, valuation models and exit strategies will be material.
Micro-living may no longer be a niche. But in the current cycle, it is no longer frictionless either.