StudentHousing: Projects, notestimates!
For the last few weeks, the German real estate press has been de- bating whether demand for “highly priced” student accommoda- tion has now been met. Given the growing number of people of all ages living alone, the constantly high number of students and the increasing trend in foreign students moving to Germany, we say definitely not. While an increasing percentage of “compact accom- modation” is being constructed, this trend has not been under way for that long.
Driven by the huge demand for single person households in all price segments, the need for student accommodation in Germany´s met- ropolitan cities and university towns with a growing population in all price segments will not be covered for years. Of course, all this has rallied numerous investors – but no one can say for sure just how many of the announced projects will actually be realised. In order to achieve long-term success and reasonable returns, it is es- sential to have a clear business model, in-depth knowledge of the “student” target group and an effective operating concept.
We want to point out two things: International Campus will be rep- resented at the EXPO REAL – at a joint exhibition stand with the City of Munich. Our consultancy subsidiary, Consulting Cum Laude, will also be conducting a highly topical survey on the current lack of young talent in the German real estate industry together with branch magazine “Immobilienwirtschaft”. You are very welcome to participate via this link!
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CEO International Campus AG
German residential real estate with a total return of 8.1 percent per year
Total return, – the increase in value plus rents – for apart-ments in the 127 largest A and B cities in Germany, increased by an average of 8.1 percent per year between 1992 and 2014. This means that total return outperformed fixed-interest bonds (REX / 6.3 percent) and international stocks (MSCI / 6.9 percent). The average rental return since 1999 has been around 3 percent higher than German government bond yields. This is according to a re-port in WELT AM SONNTAG based on data from the ECB European Central Bank, RIWIS, MSCI and Deutsche Bank.
Student Housing as a part of the asset class residential
Rents for “compact” or “small-scale” apartments with one or two rooms have risen much more sharply than students’ in-come. Students as well as young professionals and trainees are increasingly being squeezed out of the private rental market. For this reason, in Germany the stu-dent housing market segment has also become an investment niche within the real estate resi-dential asset class in the last few years. Thanks to attractive re-turns which are relatively non-cyclical and somewhat higher than traditional real estate re-turns, Student Housing has be-come a particularly appealing addition to portfolios for institu-tional and semi-professional in-vestors.
Germany: No. 1 invest-ment destination in Europe
During the European Student Accommodation Conference in London in May 2015 with more than 500 experts and partici-pants, when asked “In which country would you invest at the moment?”, around 50 percent of those surveyed replied: in Ger-many. As a result, Germany has become the primary investment location for international inves-tors in student accommodation within Europe – well ahead of the Netherlands and Spain.
Student Housing is becoming in-creasingly important as an in-vestment class, although only estimates are available as to the actual number of projects and student residences under con-struction in Germany. Many re-gional project developers want to address the issue and develop small-unit housing products, but not all market participants are able to realise “compact” or “small-scale” accommodation. Many of the housing projects fail due to lack of financing because of insufficient knowledge of the target group “student” and the absence of effective operating concepts and platforms. Building “small” is not enough. Student housing does not work in all price segments or in all cities; the city of Frankfurt an der Oder in Eastern Germany is not the vibrant city of Frankfurt am Main. What perplexes many market observers is that there is no clear distinction between products and target groups in compact housing. We want to explain three concepts.
For business people: “Serviced apartments”
The “serviced apartment” con-cept, or “short-term accommoda-tion”, is derived from the hotel business. Besides furnished one and two-room apartments in cen-tral locations with living space of between 25 to 35 square metres, services similar to those provided by hotels can be had for an extra cost: from laundry service to con-cert tickets. The primary target group is business people and pro-ject workers.
Micro apartments are small apartments with one to two rooms. They are either (partly) furnished or come without fur-niture. Compared to student housing apartments, micro apartments are bigger on aver-age and (generally) do not offer use of communal areas. The tar-get groups for micro apartments are young professionals, com-muters or PhD students, for ex-ample – all people who work and have their own income and a longer tenancy.
For students: “Student Housing”
On the other hand, today’s stu-dent accommodation includes communal areas such as semi-nar rooms, cooking area, lounges etc. and is geared towards stu-dents, i.e. young people aged 17 and over from various cultural backgrounds. This is why aspects like community building and secu-rity are especially important when it comes to the Student Housing segment. Student apartments are generally between 14 and 24 square metres and – depending on provider and quality standards – a bathroom and kitchenette.
Three questions for Alexander Gulya about THE FIZZ architecture:
How should a student accommodation be con-structed?
One the one hand, it must meet today´s needs of the residents, be integrated into its immediate environment and have a time-less design. On the other hand, it should be highly functional: with a cashless laundry room, a self-explanatory signage system and include durable furniture with scope for an individual lay-out that makes you immediately feel at home.
How can returns be achieved sustainably?
Particular attention should be paid to ongoing operating costs, especially when it comes to all-in-rents. For example, we en-sure that circulation space is op-timally utilised, and therefore only use windows which cannot be tilted and energy-efficient LED lights. Our high KfW 70 and KfW 55 standards keep energy costs minimal.
What makes THE FIZZ
housing so special?
All THE FIZZ accommodation lives up to our quality standards and reflects our brand values. Our first-class architecture and consistent high quality stand-ards set us apart from the com-petition. The hearts of our THE FIZZ residences are the communal areas with a central reception with house manager service, seminar room, cooking area and lounges.
International Campus AG at the EXPO REAL 2015
International Campus AG will be represented at the EXPO REAL 2015 at joint exhibi-tion stand no. A1.320 within the city of Munich.
Extensive survey on lack of young talent
Consulting Cum Laude, the con-sulting subsidiary of Internation-al Campus AG and specialist for employer branding and talent recruiting, are conducting a sur-vey on the lack of young talent of the so called “Generation Y” in the German real estate sector together with sector magazine Immobilienwirtschaft. The re-sults of the extensive survey will be published exclusively in the November edition of Immo-bilienwirtschaft.
Hamburg remains young
According to a Bertelsmann Stiftung report, the federal states of Berlin and Hamburg will have the youngest popula-tion in Germany by 2030 – with an average age of 43 at the me-dian.
620,000 new students
In its education report “Bild-ungsreport 2020“, the Stifter-verband für die Deutsche Wirtschaft forecasts that there will be around 620,000 new stu-dents in 2025. While the number of German students is declining, the number of foreign students is rising sharply.
Gross added value 292 million euros
According to calculations by the German Academic Exchange Service (DAAD), foreign students generate gross added value of 292 million euros each year and more than 3,100 new jobs. Pub-lic spending on education would be totally covered if just 2 per-cent of these students start working in Germany after they graduate.
Growing need for housing
According to the BBSR, the population in Germany will de-cline to 78.2 million in 2035 (2012: 80.5 million). However, the number of households will increase by 2 percent.
IC Netherlands starts con-struction in Amsterdam
IC Netherlands B.V., a subsidiary of International Campus AG, started the construction of a stu-dent residence in Amsterdam-Zeeburgereiland in June. DUWO, the largest operator in the Neth-erlands, will run the student ac-commodation as the general tenant. Zeeburgereiland is the first of five projects of the Am-sterdam portfolio of IC Nether-lands B.V.
Best student cities: Berlin ranks third in the world
In the “Best Student Cities 2015” ranking by QS Top Universities, Berlin came in third place in the category “affordability” after Tai-pei and Mexico City. Munich came fifth.
350,000 foreign students in Germany
The number of foreign students exceeded 300,000 for the first time in 2014. The objective of the German government and the federal states is to attract around 350,000 foreign students to Ger-many by 2020. China and India will play an increasingly im-portant role in this regard.