Annual Partner Assembly 2015: Student Housing in Germany

Student Housing in Germany: Balancing between affordability and availability

Rapid increases in investment in German student housing illustrate the opportunities in Europe’s largest student market. Supply is low and demand is high, but that’s not the whole story: low rents, rent brakes, stringent building codes and a decentralised market make this country’s student housing market a tough nut to crack.

Last week, the second Annual Partner Assembly of The Class of 2020 took place in Berlin – a popular student city, and one of the most attractive European destinations for international students: 20% of new students in Berlin come from outside Germany.

No wonder the city is experiencing a growing interest from the international real-estate market. Yet for all the buzz in the market, planned student accommodation projects cannot keep up with the growing number of students. Reason for The Class of 2020 to explore the German student accommodation sector in depth and to discover what new business opportunities there are for our partners.

Student numbers at record levels

The number of students in Germany has grown 25% in the last decade. Much of it caused by an influx of international students, attracted by low tuition costs and a rapidly growing offer of English programmes. The government aims for 350,000 international students by 2020. These developments drastically increase the need for student accommodation. The current number of student beds available is only a fraction of the total number of students: around 230,000 student beds for a student population of 2.7m students in the country.

To illustrate these trends, Cary Nathenson of CIEE, and Michaela Wieandt of ESCP Europe business school, shared their views on the future of students in Berlin, and what that means for student accommodation. To accommodate their mainly American students, CIEE Global Institute even built its own student-housing complex because they were not able to arrange the accommodation their students desired with external providers.

Studentenwerk keeps rents low

Nearly all students in Germany study at a public university. These do not own student housing, thus they turn to local Studentenwerke to find a place to live. Deutsches Studentenwerk (DSW) is the umbrella organisation of the 58 local Studentenwerke that together own and operate around 190,000 beds across Germany. It offers affordable housing and charges its tenants rents under €300. New construction however is limited, as Studentenwerke are dependent on government subsidies to fund their new construction. Georg Schlanzke, head of general and residential affairs at DSW estimates the new construction by Studentenwerke at 5000 student places to be built this year. Studentenwerke are not able to cooperate with private investors, as they cannot offer any net returns. According to Schlanzke, low rent is the main reason why student choose to live in residence halls. 57% of students prefer to live in a single flat or with a partner, but only 37% are actually doing so.

Changing student preferences

Many private market players argue that the needs and expectations of students have changed. Students prefer a singe flat with en-suite bathroom, something that the older Studentenwerke flats often lack.

Berlinovo, a state-owned real estate provider, plans to build 2,500 en-suite studios for students. 70% of students ask for a single flat at Berlinovo Apartments. Stefan Ehrlich, department manager Real Estate Management and Housing explains: “We keep construction costs down by using modular design and choosing sub-center locations. This way we can offer single student flats for an average of €315 per month.”

Plenty of room for more rooms

In recent years, multiple private developers and operators have entered the German market. Examples include Staytoo (MPC Capital), Smartments (GBI), and Bouwfonds IM, who all shared their view on the German student market during the event. Rainer Nonnengasser (MPC Capital) pointed out that 1,6 million students are able to pay around €400 – €500 per month for a good quality room, a price range that is currently in short supply. Benjamin Rüther (Bouwfonds IM) illustrated how many rooms remain in the market by showing that even in the worst-case scenarios, there still is a large quantitative shortage in the German student housing market.

Regulations still rule

Nonetheless, increasing building and rent regulations are becoming a bigger issue in building student accommodation in Germany. Fast implementation of a new law called the “Mietpreisbremse” (rent brake), which limits rent increases, by some states makes it more difficult to achieve attractive yields. In addition, strict building regulations are pressuring construction budget, thus limiting the increase of available mid-price beds. For example, the requirement in Düsseldorf to include a parking space for each student room and an ever-increasing checklist for environmental standards, which are already among the strictest in Europe.

Location, location, location

A second challenge in the German student market is its decentralised nature. There is no clear dominant city where education, economy and scale come together, such as Paris and London. Stafan Brauckmann (GBI) and Benjamin Rüther (Bouwfonds IM) both present maps with scorecards of attractive German student cities, but the pattern is not too obvious. Rainer Nonnengässer (MPC) focused on ‘hidden region gems’, such as Aachen, Bonn and Darmstadt.

Where do students live in 2020

So, where are developments taking us? Our panellists agreed that in 2020 there will have been a significant inflow of capital into the German student housing market, especially from Anglo-Saxon investors. The market will be larger and more diverse, serving an even more diverse international community of students. However, how large and diverse is offering of student beds will be all depends on how well private capital will be able to find its way in to this complex and regulated market.

Panelists at the panel discussion:
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Site Visits

As part of Annual Partner Assembly, The Class of 2020 organized site visits to some of the most recently built student residencies in Berlin:

Frankie & Johnny

Frankie & Johnny is a student accommodation built out of shipping containers. The project was delivered in 2014; it offers single, double and triple student accommodation. The student house is operated by EBA 51.

Visiting address: Eichbuschallee 51, 12437 Berlin

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The Fizz

The Fizz is managed by International Campus AG. The student residence contains 212 high-quality, fully furnished one- and two-room apartments.

Visiting address: Köpenickerstrasse 43, 10179 Berlin

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