Home & Living

Steady Increase in Single-Person Households and Micro-Apartments

07.

November 2019

The number of households in Germany is growing, which is explained, on the one hand, by demographic growth, but also by the continuous decline in the number of persons per household, on the other hand. The Federal Statistical Office reported this summer that the number of single-person households has increased by 46 percent since 1991 and the number of two-person households by 29 percent, whereas the number of larger households has decreased by 20 percent. The share of single-person households now accounts for 42 percent of the total (source: www.destatis.de).

The growing number of single-person households has prompted investors to shift their focus increasingly to micro-apartments. A survey by Cushman & Wakefield revealed that the transaction volume in Germany’s micro-apartment segment increased by 85 percent between 2017 and 2018, up to a total of 1.5 billion euros (source: www.cushmanwakefield.de). A breakdown by region shows that the metro regions of Berlin-Brandenburg, Hamburg and Frankfurt-Rhine-Main claimed the largest shares in the transaction total. According to Cushman & Wakefield, the net initial yield in Germany’s “Big Five” cities ranged from 3.75 to 4.0 percent (for fully occupied properties).  

Investors Taking Advantage of Supply Gap

Demand for small-scale residential accommodation is particularly strong among students. While student enrolment has gone up by 49 percent in Germany since 2007, housing in publicly sponsored student halls of residence increased by only eight percent, as the Secretary General of the Studentenwerk student services organisation recently told the Süddeutsche Zeitung daily (source: www.sueddeutsche.de). Private investors are therefore increasingly coming to the rescue.

The identified target tenant group for micro-apartments typically includes—in addition to students—young professionals because they, too, often live on their own, on the one hand, while also appreciating, on the other hand, all-in service packages that lessors of micro-apartments tend to offer, which may include complete furnishings, WiFi and electricity.  

Seniors Representing another Potential Target Group

The Cushman & Wakefield survey also stressed that the aforesaid target groups are often characterised by additional expectations that mostly involve communal living and working. To meet these needs, living and working areas are separated, and some providers collaborate with other amenity services, such as car sharing providers. An alternative concept taking things a step further is called “co-living” and involves single rooms that are let as part of larger flats. Although this resembles more or less a classic flatshare arrangement, “co-living” concepts offer tenants greater flexibility by providing various options for single room rentals, such as renting on day-by-day basis.

Another growing target group for micro-apartments in addition to students and young professionals are seniors, as Cushman & Wakefield predicts. To accommodate this target group, new-build construction projects need to ensure handicap accessibility. All that being said, Cushman & Wakefield considers micro-apartments, which so far have gravitated toward the up-market segment, rather unsuited to relieve the general demand for affordable housing, least of all in the metro regions.

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