German student housing market in catch-up mode

The German student housing market lags behind the UK but offers strong potential for growth, experts agreed at PropertyEU’s recent investment briefing on the sector.

Student housing investment volumes in Germany amounted to €2 mln last year compared with £2 bn in the UK, according to research carried out jointly by German asset and investment manager DREF and JLL. ‘The German market is behind but will hopefully catch up in the next five-six years,’ said Felix Bauer, CEO of DREF.

Discussing the differences between German and UK student housing, Bauer, who has experience of both markets, said the UK was more demanding from an operational point of view. ‘In the UK students change every year. It’s much less operational in Germany, we have students staying two to three years in one student home and so we have much less turnaround, probably around 25%.’ As a result, investors in Germany see student housing as more of a residential asset class, he noted.

Rainer Nonnengãsser, managing director of real estate development at Hamburg-based alternative investment manager MPC Capital, highlighted two key differences with the UK. ‘The German market is immature in its development – that’s one thing. Secondly we have the biggest student market on the continent after France with 2.7 million students. But we have a limited and outdated offering which is primarily dorms, and there’s a huge gap between demand and supply.’

In terms of regulations, student housing in Germany is subject to the same building requirements as residential property, ‘which makes every square metre more costly than in the UK on a like for like basis,’ he added.

MPC Capital, which has some €2.9 bn of assets under management, is currently rolling out a new student housing brand in Germany under the name StayToo. One of the first projects is located in Nuremberg where the company recently acquired a plot. ‘We intend to roll out 1,000 beds for the 2016 academic year and a similar number for the year thereafter. We’re applying a hurdle of a minimum 10,000 students per residence which leads us to 55 cities in Germany.’

Watch interviews with Felix Bauer and Rainer Nonnengãsser, and other student housing experts on PropertyEU TV's YouTube channel.