The micro-living concept is one of the main beneficiary of the residential property boom in Germany, experts agreed at the PropertyEU Germany Investment Briefing, which was held in London this week.
The residential property sector is in turn being driven by the rapid pace of urbanisation. Population levels has increased by an average of 10% in the top seven German cities since 2000, with Munich recording a rise of 20%. This growing demand is opening up opportunities for investors, the briefing heard.
'The rise of residential is the most exciting development of the last five years,' said Thomas Beyerle, managing director, Catella Property Valuation. 'Urban living is outperforming, a lot of money is going into micro-living and we expect that trend to continue.'
In Germany, micro-living encompasses student housing as well as flats for young professionals, all furnished, functional and with internet access. It is a relatively new but fast-growing sector, driven by the rise in single households and in university student numbers which have reached an all-time high.
In the first seven months of the year transaction volumes in the micro-living sector have reached €440 mln, significantly exceeding last year's annual total of €371 mln, according to Catella figures, and total investments in 2016 are expected to go over the €1 bn mark for the first time.
Foreign investors’ interest in Germany's residential sector, the biggest and most liquid in Europe, is not a new phenomenon: between 2010 and 2015 it attracted a total of almost €70 bn, around half of all the capital invested in EU resdential. But now investors are pushing beyond the top cities and into new sectors like student housing or senior living.
'Since Brexit we have seen more UK investors going into secondary cities like Essen or Dortmund, and we have also seen more interest from UK students in German universities, where there are no tuition fees,' said Felix Bauer, CEO of Deutsche Real Estate Funds Advisor. 'Student housing is developing fast, but there is a lack of supply, so we predict at least ten years of growth ahead.'
The fastest-growing trend is 'brain hubs', said Bauer, thriving centres where companies and start-ups gather around universities. There are around 20 in Germany already but their number is set to double.
Investors who want to exploit the opportunities these changes offer must 'have a tactical approach, look at social dynamics and follow the patterns of demography,' said Douglas Edwards, head of institutional business international at KGAL Capital. 'There is a sea change happening in the tenant base. Look where millennials, students and young professionals want to live and work. They want walkable locations in sustainable cities.'
The urbanisation trend will spread to Germany’s many secondary cities, university towns and 'brain hubs', heaping demand on a sector that is already creaking under the weight of current demand. The only solution is more development: ‘Housing demand can no longer be met from existing stock, which means that new builds are becoming ever more important,’ said Beyerle. Last year transaction volumes for development projects totalled €1.7 bn, a 20% increase on the previous year.
