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Student Housing Asset Class Gaining Ground

Peter Dietz
Peter Dietz
Editor at Immobilien Zeitung

The number of cities with decreasing numbers of students will go up in the future. Nevertheless investors will invest more than a billion euros in student housing. Investors hope to benefit from rising rents.

 

With about 2.8 million students enrolled for the 2016/17 winter semester, German universities reported the ninth consecutive record high. With 1.8 per cent the growth rate was, however, the lowest in ten years. According to Savills advisers this is the turning point and a future increase in absolute numbers can no longer be expected.

The billion threshold has practically been reached for the transaction volume?

But there is still a shortage of student accommodation. In particular, affordable space is a scarce commodity. In 2006 there were about 1.7 million housing units available for the approx. 1.1 million prospective graduates in the 30 biggest university locations of Germany. 10 years later about 1.5 million students competed for 1.1 million affordable lodgings. At the same time the supply of public and private dormitories remains on a low level in the cities analyzed. The consequence is rising rents, which lure more and more investors to the student housing asset class.

Last year student accommodation for nearly three quarters of a billion euros was traded in Germany, which was more than the transaction volume of 2009 and 2015 together. This year the one billion threshold might be reached. But this will hardly improve the situation on the student housing market, because private providers and operators mainly focus on the high-priced segment. For about half of the existing accommodation all-in rents of at least 450 euros per month are charged. The public student services offer low-rent rooms for no more than 350 euros per month – partly because of their statutory mandate.

Potential mainly in the medium price range

As opposed to the public providers private investors have a broader target group, which can actually pay the high prices. Apart from students, commuters, young professionals and project workers increasingly rent accommodation in the modern housing complexes, because there is a shortage of small units on the housing market. Savills think that it is logical that the target groups are spreading out to include professionals prepared to pay more. This means that operators would also find sufficient demand in cities with dropping student numbers. There is, however, a gap in the medium price range supply; so there is still potential to be developed.

 

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More articles by Peter Diez.

Students are also a target group of EXPO REAL – read the blog posts on the CareerDay here.

There is, of course, more information on the CareerDay on the website.

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