While the hotel industry in Germany has been struggling to get back on its feet after two disastrous Corona years, the sub-sector known in Germany as "Temporäres Wohnen", or temporary living, has come through the pandemic in altogether better shape.
Investors have long been identifying sub-segments of the classical hotel industry as being worthy of special attention, given their different dynamics and in particular their relevance for the way modern work is carried out, by whom, and where. Micro-living, student accomodation, shortstay, longstay, co-living - the market is broad and diversified.
For this reason, REFIRE has always kept a close eye on the special annual event, organised by Heuer Dialog, called Temporäres Wohnen. The most recent edition took place in Düsseldorf at the beginning of June, and as always with Heuer Dialog events, gathered together top speakers and industry representative for a really meaningful get-together, and a great opportunity to test the pulse of the industry after two highly difficult years.
Depending on the product offering, occupancy rates in the segment dealing with residential stays of six months or more had a wide range of uptake, as shown clearly in a study carried out by fund giant and relevant investor Union Investment and market researcher bulwiengesa. The average occupancy rate through the pandemic was 85%, but several providers performed much less well, with the spectrum ranging from as low as 8% right up to 100%.
Union Investment's Henrik von Bothmer highlighted the difficulties faced by many student housing providers, who are restricted in their renting policies to students, many of whom were absent during the pandemic. Von Bothmer said the resumption of in-person university attendance and business travel was having an immediately noticeable effect on Union Investment's own extensive holdings in the sector.
But while 85% average occupancy now was good, von Bothmer reminded his audience that that figure would not have been high enough to originally attract his company to invest so heavily in the sector. An occupancy rate of 90% and above is required to cover costs, he said.
Commercial apartments, with average stays of between one night and several months, can calculate differently given their cost and price structures. Throughout both major lockdowns in Germany, the serviced apartments had about 50% occupancy, compared to below 10% for hotels, but many of them still struggled financially as so many were new, young companies.
According to Anett Gregorius, owner of consultancy Apartmentservice, the market is now undergoing a complete turnaround, with demand surging over the past few weeks, to 90-95% occupancy in some properties. She's had to turn away 50% of her enquiries recently due to lack of supply, she said - "an unprecedented situation".
Several speakers addressed an encroaching issue in the temporary accomodation segment that is likely to prove ever more contentious - the definition of what exactly this temporary accomodation is. The strong performance of the segment through the pandemic has seen hotel operators and other providers of residential accomodation pushing into the sector, motivated by the fear of further rent regulation in the classical rental accomodation market. While converting existing properties and redefining them is easier than building new houses, the tolerated offers and definition of 'temporary housing' are attracting more and more official scrutiny, and soon, new regulation.
Banks, too, have become very cautious about lending to many of these re-development projects, the more so as they increasingly come to resemble longstay hotels. Immo Neufeld, responsible for client lending at BayernLB, told delegates how difficult it was becoming to get financing for such projects unless you were a long-term customer of the bank.
Forward deals are in any event practically dead, said Neufeld, in view of the huge building cost risk at the moment. With a likely four upward interest rate moves ahead by this time next year, converters and developers will have a hard time pushing many of their projects through, he indicated.
