Student Housing: Projects, Noteestimates

StudentHousing: Projects, notestimates!

Dear readers,

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!

I hope you enjoy the newsletter,

Horst Lieder

CEO Inter­na­tional Campus AG

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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. 

Market develo­p­ment 

Student Housing 

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 Living 

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. 

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News 

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.