The German student housing market achieved an outstanding transaction volume of over € 200 m in 2014, according to international real estate advisor Savills. This was  by far the highest volume of investment to date for this type of accommodation.

Over the last five years, the student housing market in Germany  has experienced a construction boom of privately financed and operated student apartments, which has in turn created the availability of increasing levels of investable stock. 
“The sharp rise in private supply is attracting new players to the investment market,” says Marcus Roberts, head of student investment at Savills. “Notably, pension funds and insurance companies are increasingly acting as buyers for the first time in this market. But we are seeing increased interest from the sector from overseas investorsoperators looking to grow their existing platforms”.

German universities have recorded a significant increase in student numbers in recent years, due not only to the abolition of military service in 2001, but also to the growing numbers of international students choosing to take up their studies in the country. Currently almost 12% of all students across Germany’s 740 universities come from abroad. The real driver in the growth of the private student housing market has been the lack of choice of accommodation types, for this growing number of students,. In response to this demand, private investors are filling the gap in the market and building new properties on a large scale offering a quality new build product which is well managed and maintained and meets both domestics and international student needs.
Matthias Pink, director and head of research at Savills in Germany, comments: “In 2010 there were just 12,000 places from private landlords in the 30 largest German cities. Since then the private stock in these cities has doubled to around 25,000 places, and it is foreseeable that, taking into account all properties under construction  and in planning, the stock levels will grow to around 41,000 places by 2020.” 

It will then be expected that the proportion of student accommodation provided by private operators in the 30 largest university cities will rise to approximately 22%, compared to the current supply of around 16%. This still remains below the levels seen in the more mature markets in the US and UK. 

While private providers are almost exclusively constructing apartments, nearly two thirds of the residential stock held by student associations and other non-profit institutions are characterised by shared accommodation.
“The different qualities of the buildings as well as the type and the fit-out of the residential units result in a dichotomy of the market in terms of pricing”, establishes Marcus Roberts.

While the upper price segment (all-inclusive rent of over € 450per apartment) is almost fully served by private operators, student associations primarily provide accommodation in the low-priced segment. The majority of the private accommodation in planning or under construction will likewise be concentrated in the high-priced segment.  None of the providers have so far been successful in advancing to the medium-priced segment on a larger scale potentially indicating a new, more specific opportunity in the market.

“However, efforts to get access to the medium income bracket are evident and are likely to bear fruit soon,” concludes Roberts. “With this in mind, along with the  current development pipeline, there will certainly be an increase in future investable stock which will stimulate transaction volumes markedly in the long term.”

Spotlight Student housing Germany - July 2015 (PDF)