issues Luxembourg fund
a few weeks ago the winter term 2013/14 started. In the past
year alone, there were 2.5 million students in German
universities – and the numbers are increasing. The research
consultancy bulwiengesa estimates that by 2015 there will be
about 2.8 million students. Small-scale residential
accommodation in attractive towns is in particularly short
supply. It is precisely in these cities where students are
competing for one- or two-room apartments with mostly more
affluent young professionals, commuters, and single people.
The high demand has attracted the attention of developers and
investors with a range of different concepts, strategies and
products. While student housing in Germany is by no means yet
an asset class in its own right, like residential, offices or hotel
property, the market and demand for it are, however,
developing. In times of declining returns on traditional real
estate investments, institutional investors are searching for
alternatives which combine reliable cash flows with higher actual returns than the returns anticipated by the market.
International Campus has issued the first Student Housing fund
especially for these investors. We are currently providing more
than 2,400 apartments as a capital investment and for the fund
in eight locations. Further projects for the expansion of our
portfolio are in the pipeline. You can find out more about the
fund in this edition of our Newsletter.
CEO International Campus AG
Overview of student
housing market in
winter term 2013/14
The student housing market is not
only very tight in German
metropolises like Hamburg, Berlin
and Frankfurt, but also in
numerous smaller university
towns like Freiburg, Hanover or
Darmstadt. There are several
newspaper reports of emergency
accommodation, bizarre flatmate “auditions” and run-down rooms
far from the university. The
enormous demand for small-scale
accommodation from students is
also boosted by demand from
other groups—for example, young
professionals, commuters or
Many students, little accommodation
According to the German National Association for Student Affairs (Deutsches Studentenwerk), at the start of the winter term 2013/14 there were more than 50,000 students on the waiting lists. At the same time there are only about 230,000 subsidized places in halls of residence. There are approximately another further 10,000 places under construction or in the planning stage. The student associations are thus providing less than 10% of student housing. The student associations (Studentenwerke) predominantly provide accommodation for those dependent on publicly-funded accommodation.
In the private housing market rents vary according to region, immediate location, size, fit-out, market segment – and of course the attractiveness of the product brand. Monthly apartment rentals in attractive university towns range from €350 – 600.
Current studies of student housing
Study: Macro-scoring the student housing market
In Macro-scoring German Student Housing Market from October 2013 the research experts from bulwiengesa evaluated all German university cities with more than 7,000 students in a scoring. According to the analysis of 18 variables from the categories, status quo, history and perspective, 25 out of 76 towns provide very good conditions for investment in student housing. The drivers of a high long-term demand are the increasing proportion of those entitled to study as well as the increasing number of university entrants starting their studies. The first five places, with an excellent reward/risk ratio, are Munich (80.9%), Hanover (77%), Cologne (75%), Berlin (73.8%) and Frankfurt (73.6%). bulwiengesa considers student housing to be a profitable investment product, which can achieve a long-term and secure rate of return of 5 – 6%.
Study: Spotlight European
In their study on Spotlight European Student Housing, the international property services provider Savills, came to the conclusion: “The Student housing investment market matures”. Investors looking for a return found student housing provided a stable cash flow. The returns in prime locations reach about 5.5% in Germany, Great Britain and France. Rising incomes, living standards and rapidly increasing numbers of foreign students ensure that there is a significant group of students with very high expectations for their accommodation. In this regard Savills emphasise that, for the most part, there are no tuition fees anymore in Germany.
Study: Cities with tight Student Housing markets
In the ranking Tight Student Housing markets in Germany, the Berlin property developer GBI AG analyses 81 university sites with 22 variables. Today 25 attractive cities and university towns have already very tight student housing markets – also in the next decades these cities will have an enormous demand for student accommodations. Beside metropolises like Munich, Hamburg and Frankfurt, there is a very tight housing market for students e.g. in Bremen, Freiburg and Hanover. Study: Invest in Student Housing In their study Investment in Student Housing in May 2013, Bouwfonds Investment Management, an issuing house belonging to the Dutch Rabobank Group, estimated the total investment in Germany, France, Great Britain and the Netherlands as being around €300 bn (with an average value of €45,000 per room). 48% of all international students come to Europe to study. Germany is one of the top five destinations for students in the world. Here there are now more than 600 master’s courses offered in the English language. Because student apartments offerattractive returns with a low risk profile, student housing is to be an attractive asset class which can provide solid capital growth for an existing portfolio.
Three questions for Horst Lieder about the student housing fund:
International Campus has founded an investment trust; can you tell us more about it?
International Campus AG has launched an investment trust “International Campus Student I SCA” based in Luxembourg for the expansion of the platform. In a first closing we have already acquired €50 m of equity capital. That puts us directly into the investment phase. The planned equity capital volume is €250 – 300 m, with which we will be able to expand a portfolio with a total volume of €600 – 800 m.
For whom would this be an attractive investment opportunity?
The participation offer of the fund is directed towards professional investors who wish to invest a minimum of €10 m within the context of a private placement. The expected term is five to seven years – with a target return on equity capital (IRR) amounting to 14 per cent.
What strategy are you pursuing?
Currently International Campus is providing more than 2,200 student apartments for the fund in seven German cities, for example in Frankfurt, Berlin and Hanover. Further projects are already in the pipeline and we are constantly assessing further locations to expand our portfolio. Our objective is to be one of the leading providers of student housing in Germany within five years.
Eleven elite universities I
n Germany today there are eleven “Elite Universities”, which receive additional public funding for their research and future development plans. Among the cities with elite universities are Bremen and Berlin.
CBRE foresees a demand for 47,000 apartments
In their Market Report on Student Housing from April 2013, the property consultancy CBRE estimate that there is a current demand for 47,000 additional student apartments in the upper segment alone.
Berlin continues to grow
There are around 3.375 million people living in Berlin (December 2012). Alone in 2012 the population increased by 41,324 – while this year saw only 4,500 residential units being completed. In the capital there
are more than 160,000 students attending 42 universities.
More single-person households
The Federal Statistical Office (Statistisches Bundesamt) has established, that 41 per cent of all German households consist of only one person – whereas in 1991 it was still only 34 per cent. In cities like Berlin or Frankfurt
the proportion of single-person households is over 50 per cent.
According to the 20th Social Survey, published in summer 2013 by the German National Association for Student Affairs (Deutsche Studentenwerke), students in Germany have an average disposable monthly income of €864. According to the survey 26% of students have a monthly income of over €1,000, but the study is based on data from 2010-12. We assume that this proportion is probably now about 30% as incomes and rents have risen to some extent. In the past two years, many German cities have seen rents rise by 5–10% per year. According to the survey, between 2010 and 2012 about 21% of students were paying more than €350 for rent and ancillary costs. The average rent was €298. 62% of all student are on full-time first degree courses, are living away from home and are single.
Young people “swarming”
Empirica has established that the group of 25- to 30-year-olds is concentrating in certain selected cities to a greater extent than in the past. The proportion of young people is now more than 30% above the German average in 18 German cities, including Freiburg, Leipzig, Jena, Munich and Darmstadt.
World Universities 2013
According to the Academic Ranking of World Universities 2013, there are four German universities among the 100 best of the world: TU Munich and the universities of Heidelberg, Munich and Freiburg.
Germany still attractive
In 2012 there were a total of 265,000 registered foreign students in Germany. By 2020 the number of international students is expected to rise to 300,000.
Event tip – IC at GRI
International Campus will be discussing the subject of student housing with numerous experts at the German GRI in Frankfurt on 7–8 May 2014.