Germany 3 | International Property Investment

Our specialty lies in finding pockets of value on a global scale. But in times of world-wide uncertainty, these are notably more challenging to source.

Europe’s strongest contender for crisis-resilience is, without a doubt, Germany. It has the largest economy in Europe at USD4 trillion and operates as a renowned safe-haven for investment. IP Global has been active in this market since 2008 and it has proven to be a very fruitful venture for our investors, who’ve not only seen strong capital appreciation but also achieved on average 112% of IP Global’s rental estimates upon development completion. It is with this experience that we are excited to announce our latest investment opportunity in the promising city of 莱比锡.

Today, the booming economy and strong population growth underpin Leipzig’s housing market. The population has already increased by 24% since 2000 and is expected to rise by a further 25% to 750,000 residents by 2035, making it Germany’s fastest growing city. While demand for housing has expanded rapidly, housing supply has been slow to respond with a mere 13,510 units completed in the decade up to 2017. As demand soars and supply struggles to keep up, the vacancy rate in Leipzig has tumbled from as high as 12% in 2011 to as low as 2% today. This excess demand has put sustained upward pressure on house prices, with Leipzig being one of the few locations in Germany to experience double-digit growth in the year 2019.

As we gear up to take advantage of this unique German market, let’s explore Leipzig’s background to better understand how this unique opportunity materialised.

8 Things You Need To Know About Leipzig’s Revival

1. Leipzig has a pioneering heritage dating back to the 14th Century

Located 160km south of Berlin, the city of Leipzig is situated at the confluence of two great continental trade routes, the east-west Via Regia and the north-south Via Imperii. Leipzig therefore became a flourishing trade centre and economic hub in the 14th century, and during this time developed a rich culture and leading educational role within Germany. The University of Leipzig, founded in 1409, is the second oldest university in Germany and one of the oldest in Europe.

Leipzig quickly became a hub of innovation, giving rise to the world’s first daily newspaper published in 1650. The first high speed printing press in Germany was later invented here in 1829, along with the introduction of steam-powered production machines which revolutionised the textile industry. At the forefront of business and technological change, the first long distance railway line in Germany was completed between Leipzig and Dresden in 1838. This laid the foundations for Leipzig’s industrial development, and by 1915 Leipzig Central Station was the largest rail station in Europe.

Leipzig was one of Europe’s fastest growing cities at the end of the 19th century, and by 1933 was the fourth largest city in Germany. It was relatively unscathed by the Second World War compared to the neighbouring city of Dresden, and therefore became the industrial production centre of the communist-run German Democratic Republic’s (GDR) economy. In the 1980’s Leipzig became the centre of a peaceful protest movement against the GDR’s policies, such as the erection of the Berlin Wall in 1961. These peaceful protests culminated with the Monday Demonstrations in 1989 which are widely credited as accelerating the fall of the Berlin Wall and paving the way for German unity.

2. Leipzig is in the midst of a revival which began in the late 90’s

The 1990’s were a difficult period for Leipzig. After the fall of the Berlin Wall and German Reunification, many former communist-era East German industries collapsed. This resulted in severe job losses and depopulation in Leipzig as many people migrated to West Germany. The outlook appeared quite bleak, however with the newly elected Mayor Wolfgang Tiefensee in 1998 came renewed hope for the city. New strategies focusing on education, urban renewal, economic development, social integration and environmental reclamation were considered the key to renewed growth of private enterprise and investment.

Leipzig reinvented and refocused its economy on five key business clusters, selected as promising industries with future high-growth potential. These five key clusters which have experienced the highest levels of employment growth since 2005, form a robust platform for the diverse economy to innovate and grow sustainably.

3. Leipzig has attracted some prestigious names in business and is fostering a new start-up scene

The five key clusters have proven highly successful since their creation. Better infrastructure and vigorous support of the new industry focus has aided the city in attracting prestigious “lighthouse” firms such as Porsche, BMW, DHL and Amazon. These firms act as beacons for Leipzig’s economic revival and growing global status.

A start-up scene is materialising in the city too, attracting many founders with its high quality of life and relatively low costs compared to other cities. Numerous incubators, accelerators, and co-working spaces provide entrepreneurs with business premises, expertise, and high-quality talent creating the perfect environment in which start-ups can flourish. There are currently an estimated 250 start-ups operating in Leipzig focusing on a range of sectors such as e-commerce, big data, energy infrastructure and smart mobility. Leipzig currently ranks as the 5th strongest start-up hub in Germany, and 117th globally -having jumped 173 places in a single year.

4. Leipzig’s economy is already twice the size it was in 2000 and is forecast to continue rising at an explosive rate

As a result of Leipzig’s successful strategy, the economy has doubled in size since 2000, totalling EUR22 billion as of 2019. After a slight decline as a result of the coronavirus in 2020, the economy is expected to increase by further 75% and reach EUR37 billion by 2035. At the same time, average GDP per capita has risen 62% since 2000, reaching over EUR64,000 as of 2019. After a slight dip in 2020, GDP per capita is expected to increase to EUR108,800 by 2035, an increase of 75%.

As Leipzig’s economy continued to flourish, 64,000 extra people joined the workforce resulting in the unemployment rate falling from a high of almost 21% in 2005 to 5% 2019. The unemployment rate is forecast to rise slightly in 2020 to 6.2% due to the coronavirus before swiftly returning to its pre-crisis full-employment level in the following years. At the same time, disposable incomes have increased from EUR25,700 in 2000 to EUR36,600 in 2019 (+42%). While disposable income is also expected to drop slightly in 2020, it is expected to rebound swiftly and continue rising to hit EUR59,300 in 2035, an increase of 131% since 2000.

5. Leipzig, being in the geographical centre of Europe, continues to be a renowned hub of connectivity

leipzig, Germany - April 22, 2019: People at the tram stop Augustusplatz in Leipzig at night.

Leipzig central station is in the middle of the Central German Railway Network and currently sees an average of 60,000 commuters per day. In January 2020, the German government announced a record breaking EUR86 billion investment programme for the national rail network.

The decision was based on Germany’s commitment to reduce transport sector CO2 emissions by up to 42% by 2030. The program aims to see regular high-speed connections operating between larger cities, with long-distance rail passengers increasing from 148 million in 2018 to 260 million (+76%) by 2030.

With over 515 tram stops spread across the city, Leipzig boasts Germany’s second-largest tram network which services the city centre every 2-3 minutes. Alongside the bus network which encompasses 556 stops, the public transport network spans over 955 km across the city. In 2018, over 156 million passengers used tram and bus services in Leipzig, an increase of 400,000 on the previous year. The Leipzig Transport Authority continues to improve and expand its services, investing EUR30 million in 2018 alone.

6. Leipzig is home to the second oldest university in Germany and continues to champion a high calibre of educational offerings

Education has been a focal point in the city of Leipzig since the foundation of the University of Leipzig in 1409. As one of the oldest universities in Europe, former professors include the globally renowned physicist Werner Heisenberg and Nobel Prize winning chemist Wilhelm Ostwald. The university has also produced world-famous alumni such as writer Johann Wolfgang von Goethe, and philosopher Gottfried Wilhelm Leibniz.

Leipzig also has 6 universities of applied sciences, and approximately 150 research institutes and clinics including the specialist Heart Centre Leipzig, the IZI Fraunhofer Institute for Cell Research and Immunology, the Max Planck institute, the Media Campus, and BIO CITY LEIPZIG. Founded in 1764, the Academy of Fine Arts Leipzig is one of Germany’s oldest art schools specialising in fine arts, graphic design, photography and new media art. It is home to two world-renowned modern art movements, the ‘Leipziger Schule’ and the ‘Neue Leipziger Schule’. There are approximately 40,000 students living and learning in Leipzig today.

7. Leipzig has a rich cultural history, particularly in musical arts

Leipzig is one of the most vibrant and unique cites in Germany today. The musical heritage is truly extraordinary with an abundance of great composers such as Johann Sebastian Bach, Clara and Robert Schumann, and Richard Wagner. The city also has a tradition of hosting great musical performances, with the famous Gewandhaus Orchestra alone attracting over two hundred thousand people to its concerts each year. They also perform Bach cantatas with the world-renowned St. Thomas Boys Choir – Leipzig’s oldest cultural asset, founded in 1212 - in St. Thomas Church where Bach once worked and is now laid to rest.

8. Leipzig’s sporting success in recent years, embodies the revival of the city as a whole

RB Leipzig was founded in 2009 when the Red Bull company purchased the playing rights of the fifth-tier side SSV Markranstädt with the intent of advancing the new club to the top-flight Bundesliga. In May 2016 this became a reality with RB Leipzig securing their spot for the 2016-17 season.

One year later, their meteoric rise continued with the team capturing a place in the 2017-18 UEFA Champions League. Red Bull has invested over EUR100 million in the club thus far, while match attendance numbers have sky-rocketed from 2,000 per game in 2009 to over 43,000 today.

Annual turnover for the club jumped 82% to EUR218 million in 2017 due to the promotion to the Bundesliga. The club’s income has continued to grow thereafter to EUR268 million for the 2018/19 season, putting RB Leipzig in 4th position in income terms after Bayern Munich, Borussia Dortmund, and FC Schalke.

Europe is abuzz with change, and new lifestyles are being embraced. In Germany, for example, the Federal Statistical Office predicts that by 2040 one in four people will live alone -a vastly different outlook from the turn of the century. Millennials are getting married later, putting careers first in a fierce focus on independence. And with time a rare commodity, people don’t want to waste it on a long commute.

Enter the growing lifestyle trend of micro-living. Otherwise known as the future of making limited space work in flourishing European cities. Expansive, cluttered apartments are a thing of the past. Minimalism is the future of city-centre living.

Snapshot! What is a micro-apartment?

The 5 top reasons people are investing in micro-living:

1. Demand is high

A classic characteristic of micro-living is that it is suitable for singles and, occasionally, couples. One might find this a disconcerting factor when looking at the rapid global population growth. A more accurate benchmark, however, is to measure your investment against the trend of household sizes. For example, the outlook for micro-apartments in Germany, Sweden or Austria is dramatically different to that of Ireland or Poland.

Germany is one country particularly primed for micro-living. As you will see by the below graphic representation of its household structure, single households will rise to an alarming 19.3 million by 2040.

According to Cushman & Wakefield, 2018 saw an increase of 85% on the previous year in transactions for micro-apartments, bringing the total to EUR1.5 billion. Berlin, Hamburg and Frankfurt in particular saw a large growth in the market. In fact, Germany as a whole has the highest investment in micro-living in the European Union.

2. Prime Locations

Due to the large number of young working professionals and students embracing convenient living, micro-flats are usually located near key employment nodes and the best universities.

Europe is a mecca to highly-skilled immigrants and offers some of best education in the world. Key cities are seeing a growing demographic of young working professionals and international students, drawn to fruitful job prospects and outstanding universities.

Considered a very lucrative market, in 2018 alone, the European student accommodation investment landscape saw a transaction volume just short of EUR10 billion.

According to UNESCO, the UK, France, Germany, Italy, The Netherlands, and Spain are among the top 20 destinations for global students studying abroad. This correlates with Corestate’s ideal markets for micro-apartments as seen in the below graph.

In addition to this, Cushman & Wakefield found that there is a clear correlation between micro-apartment buildings under construction and urban areas in which demand for residential property is highest. Locations like Berlin, London and Vienna are the leading cities of education and have buoyant job markets, it is no surprise that these are the places fervently jumping on this new lifestyle trend.

3. Many Different Types and Target Age groups

There are 3 main sub-sectors of micro-apartments. These are namely: serviced apartments, student accommodation and furnished micro-apartments. The commonality among them all is the convenient location, furnished-nature and shorter-term leasing.

One mistake to make is to assume that the only target demographic is the youth, although currently it is the largest market. With the world becoming so globally accessible, commuting and frequent business trips are a way of life for a large share of working professionals.

Many of which do not wish to live in hotels as they prefer the privacy and a space to make their own. This demographic further elevates the rental prospects as luxury living becomes compact.

Micro-apartments are becoming relevant in several phases of life due to changes in society and demographics. This makes property investment in micro-living a multifaceted opportunity for all generations. There are young adults requiring student housing, new working professionals branching out from families and expats and commuters of all ages who prioritise convenience. In future, there could even be a market for the elderly with mobility constraints to benefit from assisted micro-living. As the housing supply pipeline narrows across European cities, the future of this trend has countless possibilities but the one certain forecast is growth.

4. Initial Capital Requirement is Low

Property has one of the more secure income generators of all the asset classes as it is not as heavily benchmarked to the economy. If trouble looms for the stock market, people still need places to live and with populations growing exponentially, the security is further cemented each year.

It’s important to diversify your portfolio with a real estate investment, but often the biggest concern is the substantial lump sum of capital needed to finance the purchase. This is particularly an issue in sought-after areas.

Given the smaller property size of micro-apartments, the entry point for investors is much lower than that of a 1- to 2-bedroom apartment. It is a great opportunity to get a foot on the property ladder. Moreover, the lower price presents the opportunity for property investors further up the ladder to purchase more than one apartment, so the risk is spread across multiple sources.

5. Income is rewarding, investment is secure

There are many income benefits to micro-apartments but two particularly stand out. The first is that, when done well, their appealing modern amenities combined with a central location make the return on square metre comparably high while still being in the price range of a far larger demographic. Furthermore, they generally have lower running costs and are more eco-friendly due to their size and new-build nature.

The second income benefit is in the short-term nature of the lease. It is the custom in many European countries like Germany to rent on a rolling lease, which means to begin the process as a tenant, there is usually vigorous credit history scrutiny and a 3-month security deposit. Micro-apartments take all this hassle away. Moreover, the buy-to-let investor benefits as the 12- to 24-month contractual period allows more price elasticity to increase the rent according to demand.

In terms of investment security, one has to look at the facts. A definitive figure cannot be placed on the overall supply of micro-apartments because there are so many different segments to micro-living.

Given that the largest portion with measurable data is student housing, we will base further analysis on those metrics by Cushman & Wakefield. To date, primarily 60% of investment in the student housing segment has been domestic, with a further 28% coming from European countries. Seeing as this is a relatively new concept and demand is rapidly growing, investor confidence remains secure that the market for resale will be particularly fluid.

Furthermore, it bodes well for security that the growing youth are the largest sector using micro-living. It means the investment is not correlated with economic fundamentals but rather the value placed on career prospects and education. Micro-apartments are therefore a defense investment and an ideal risk diversification strategy (Corestate).

Key take aways

● Students, international young professionals and a growing number of singles fuel a fervent demand for micro-living.
● The high quality, flexibility and lower rent in central locations are key features to tenants.
● Micro-apartments are attractive to risk-averse investors as occupancy rates soar.

Ever since the marriage of the East to the West in Europe, Berlin has quietly become the bargain of the century. When compared to cities like London or New York, you get two to three times more per square metre, yet the projected growth in value is still higher.

1. Favourable Demand and Supply

The pull to Berlin has many facets that contribute to its growing popularity. From great institutions like Google and Tesla attracting first-class universal talent to the trendy lifestyle and liberal arts scene making it a millennial favourite. In 2019, Berlin was recorded as the most populated city in the EU, totalling 3.76 million residents.

Berlin is not only Germany's capital for government but also for education and art, making it an increasingly desired location for a favourable rental demographic. Almost 70% of the population is below 35 years of age and there’s been a steady movement towards smaller, centrally-located dwellings in line with shrinking household sizes.

It is expected that with the current steady growth in workforce - which is greater than both London and Paris - 20,000 additional housing units will be needed each year until 2030. Only 16,956 apartments were completed in 2018 resulting in an under-supply of at least 87,000 units.

In essence, demand continues to gain quick momentum while supply shows rather slow growth.

2. Investment Security

Germany is a founding member of the European Union and G7, making it one of the most important global economies with a GDP of EUR4 trillion as of 2019. With continued economic performance and political stability, Germany maintains its position as a safe haven for international capital. Sentiment remains positive for 2020 despite uncertainty internationally thanks to the robust labour market and increasing domestic consumption.

Germany is the third largest exporter in the world with a GDP totalling EUR4 trillion, the economy is characterised by a highly skilled workforce and high levels of innovation –ranking fourth in the world for research and development. The country's efficiency is at its peak, proven by its ability to mitigate COVID-19's effects to the point that the unemployment rate remains a low 6.3% as of July 2020.

As a result of the brief yet effective lockdown, and the enormous fiscal program worth 50% of the total European response, the German economy is on track to rebound far quicker than the majority of other advanced economies globally.

While the German economy proved itself highly resilient to external shocks, Berlin’s economy with average GDP growth of 5.6% p.a. since 2016 has far outpaced the national average. The city’s diverse economic base including the large public, business, and knowledge intensive digital services sectors meant it was far less susceptible to external shocks than economies heavily reliant on banking or the manufacturing and export of automobiles, ships and airliners.

3. Infrastructure and Development

With the new Berlin Brandenburg International Airport shortly opening its doors, Berlin will become a leading city in connectivity.

The airport intends to have a capacity of 35 million passengers per annum with plans to make it 50 million in the near future, providing direct links to the financial capitals of the world. Once in the city, foreigners and Berliners alike can make use of the largest central station in Europe, housing the metropolitan system comprised of 19,000km of rail lines that connect to all major hubs nearby.

The transport system is so efficient that Berlin has the lowest ratio of automobiles per head of any tier 1 German city. This is a fact Berliners wear with pride considering the cultural focus on sustainability. Unsurprisingly, this has attracted and been endorsed by the leader of the sustainability technology industry, Elon Musk.

In November of 2019, the announcement was made of plans to open Europe’s first Telsa Gigafactory just outside of the city. This will undoubtedly attract more highly skilled talent to the area, which already holds the highest number of foreign talent in well-established tech start-ups second only to Silicon Valley.

Another interesting development is the regeneration scheme Europacity. Attracting prestigious employers such as PwC, KPMG, TOTAL and 50Hertz, the 61-hectre development of office space and housing is situated in the geographic centre of Berlin. It promises to become a primary employment node and significantly increase the area of Mitte’s real estate value.

4. Spirit of Innovation and Transculturality

Berlin has become a hub for digital media, medical research and most importantly, technology. In fact, 70% of all of Germany's well established digital and technology start-ups are based in Berlin. The city received €4.1 billion euros last year in venture capital for the industry.

Berlin is renowned for being strongly diverse, youth-centric and contemporary. It wore the crown of World’s Best City for Millennials out of 110 cities up for nomination in the Nestpick 2018 study. This is no surprise as its use of English as a common medium and its strong lead in Europe’s art scene made it popular for millennial expats.

With promising job prospects in booming industries it is no surprise that the youth is narrowing in on Berlin. The combination of historical charm and green spaces with all the modern conveniences of an advanced city make it an easy-choice for young renters.

Over the past twenty-five years, 莱比锡 has undergone enormous social, economic and structural change.

With the fall of the Soviet Union, 莱比锡 was a town of empty buildings, air pollution, heavy industry and a population that shrunk by half. Today, it is Germany’s fastest-growing city with a much- talked about economic, artistic and cultural renaissance earning it the moniker of “Hypezig”.

And believe the hype you should. While traditionally overlooked for contemporaries like Munich and Berlin, today the city’s development is being compared to that of Berlin in the late 90’s and early 2000’s.

Offering a great quality of life, amenities for modern living, job opportunities and a growing economy, read on to find out why Germany’s 8th largest city is becoming one of Europe’s hottest investment locations.

1. Sustainable Economic Development

莱比锡’s rapid economic development is underpinned by the government’s Leipzig 2030 initiative – a blueprint for transforming the city into a national and international business hub and leading European city of arts and sciences through ecological, social and economically-balanced growth.

莱比锡 2030 draws together a number of aspects relevant to the city’s development - focusing on 11 concept areas: housing; economy and employment; free spaces and environment; education; social topics; culture; centres; transport and technical facilities; preservation of ancient monuments; sports and universities and research establishments.

2. Mix of Industries

莱比锡 is a growing city with a broad economic base that welcomes innovation. While traditionally a manufacturing hub, one of the main tenets of the 2030 plan is to diversify its industries ensuring balanced and sustainable growth of the city.

Industry giants from across a number of sectors continue to heavily invest and set up their headquarters in 莱比锡. Automakers like Porsche and BMW, manufacturers including Siemens and DB Schenker to pioneering research institutes and creative and media companies – each are contributing to the city’s economic revival.

The 2030 plan also focuses on developing 5 high-growth industries – Healthcare and Biotech, Logistics, Media and Creative Industries, Automotive and Suppliers and Energy and Environment – positioning 莱比锡 as one of Europe’s most attractive and pioneering hubs.

3. A Transport and Infrastructure Hub

Benefiting from its central location in the network of trans-European transport corridors, 莱比锡’s strong rail, road and air infrastructure make it a top destination for a wide range of businesses.

Due to its appeal as a European logistics hub, companies like DHL, Kühne & Nage, AeroLogic, Lufthansa Cargo and Future Electronics have each taken advantage of the 24/7 freight services at 莱比锡/ Halle, Europe’s fifth-largest cargo airport.

The city is also at the centre of the German Railway Network and part of an international rail container route reaching all the way to China. 莱比锡’s public transportation network received €30 million investment in 2018, while a well-connected Intercity-Express places the city just 1 hour from Berlin and 3 hours from Hamburg, Frankfurt or Munich.

As a result of this strong infrastructure network, a number of value-added services have arisen in and around 莱比锡, including globally renowned trade fairs and conferences at the Leipziger Messe and the Congress Centre 莱比锡.

4. Healthy Population Growth

After the fall of the Berlin Wall in 1989, 莱比锡’s population essentially halved by the mid-90s with major brain-drain as the younger population flocked to West Germany or abroad.

The last decade has seen 莱比锡 begin to regain popularity and emerge from a post-in

trial city to a modern, vibrant and knowledge-based economy with new generations of innovators, entrepreneurs and ambitious individuals transforming it into a dynamic and friendly hub.

At the same time, the Government is encouraging ‘natural’ population growth through strong social policies and increasing employment opportunities that result in the city having one of the highest fertility rates in Germany.

Today, 莱比锡 is Germany’s fastest-growing city, home to a young and educated population that is expected to grow by another 16% to 700,000 inhabitants by 2035.

5. Smart City Initiatives

莱比锡 was chosen to be part of the European Union’s ‘Triangulum’ project, a five-year, €25 million Horizon 2020 initiative to demonstrate cutting-edge smart city technologies and roll them out across the region.

The Triangulum project helped to establish a Smart Infrastructure Hub in 莱比锡, bringing together startups and upcoming technology companies in the field of energy and the Internet of Things to create visions on smart city topics such as smart grids, big data and intelligent mobility and renewable energy resources. The project has delivered a big boost to 莱比锡’s smart development and is encouraging further advancements across all parts of the city.

6. Vibrant Startup Scene

A vibrant startup scene is driving 莱比锡’s reputation as an up-and-coming hub for innovation and tech entrepreneurship. An estimated 200-250 startups are currently operating in the city in a wide range of industries, including e-commerce, big data, infrastructure, energy and mobility as well as sciences, healthcare, biomedical and engineering.

Founders, engineers, computer scientists and creatives are being drawn to the vibrant yet affordable city, while a number of incubators, accelerators and coworking spaces have sprung up to support 莱比锡’s growing entrepreneurial ecosystem.

7. A burgeoning Real Estate Market

With a growing population and robust economy, 莱比锡’s real estate is experiencing healthy growth. With prices at around 60% of Berlin’s property market, the city has become popular with renters and purchasers and remains an affordable location among the Big 8.

As vacancy rates remain low at just 2%, it is expected that both prices and rents will continue to rise due to the increased demand for housing across the city underpinned by its robust and growing economy.

The city has earmarked a number of regeneration areas to rejuvenate parts of the city, including ‘social aspects’ such as new schooling and improving transport facilities depending on the needs of the population in those areas.

With over half the world’s population living in cities, space is rapidly diminishing, costs are rising, and for many, finding a suitable place to live has become a challenge.

One solution that is commonly used in expanding cities is to go small, without sacrificing comfort. Micro-apartments, typically measuring under 30 square meters, are now being developed around the world. Once assumed to be a fad due to their minimal floorplans, Berlin’s market shows that micro-apartments are a sensible and desired option amongst the younger population.

BERLIN IS EVOLVING INTO A YOUNGER CITY

Berlin is attracting new types of residents, and this is understandably impacting the city’s housing requirements. In 1961, single-occupant flats accounted for 21% of all German households; by 2012, that figure had nearly doubled, reaching 41%. Berlin rises above this average, with a 2017 report stating that more than 57% of the city’s households were single-person residences.

In the last ten years, Berlin’s population has grown by hundreds of thousands. Government statistics put the city’s current population at over 3.7 million people, compared with just under 3.4 million in late 2008, and many of these new residents are under the age of 35. Enticed by the city’s exciting lifestyle options, universities, and growing career prospects, we are seeing impressive numbers of students, young professionals, start-up entrepreneurs, and weekday residents looking for new accommodation types that suit their lifestyle and budget.

THE CHANGING DEMANDS OF RENTERS

While older generations may have dreamed of expansive houses away from the hustle and bustle of central areas, many young urbanites prefer smaller units that offer lower monthly rent rates and easier access to their desired employment, education, and weekend hubs. These groups appreciate the unique design of the micro-apartments and often do not carry with them enough possessions to warrant needing a larger space.

According to a recent study from the housing portal Immowelt, rents in Berlin have more than doubled in the last decade, and many renters are being priced out. Due to their reduced size, micro-apartments in large German cities rent for an average of EUR 600 per month. In comparison, 2017 statistics show that a one-bedroom apartment in the center of Berlin can average upwards of EUR 1,000 a month. Beyond the student and young employees who traditionally have been the target demographic for micro-apartments, increasingly the units are appealing to singles of all age groups who wish to reduce their monthly rental costs.

WHAT RETURNS CAN MICRO-APARTMENTS OFFER REAL ESTATE INVESTORS AND ARE THEY A SAFE BET?

The small square footage of micro-apartments is liked by renters but also offers strong potential for investors. While the average rent of these smaller units is cheaper than one-bedroom apartments in comparable locations, they offer very attractive rental yields as they allow owners to rent them out at costs that, compared to the average property or full-sized home, are relatively high per square meter.

As Berlin continues to grow as a leading hub for technology companies, university students, and real estate investors, prices will only increase and the number of individuals looking for small residences with rents to match will likely grow as well.

A micro-apartment could be the perfect purchase for investors wanting a slice of one of the most energetic and attractive capitals in the world.

TAKEAWAY POINTS

OUR NEWEST MICRO-APARTMENT INVESTMENT OPPORTUNITY

Einbecker 47

Einbecker 47 is a modern residence located in the growing Berlin neighbourhood of Lichtenberg. Positioned close to a number of educational institutions and one of the city’s largest technology hubs, Einbecker 47 sits in the centre of one of Berlin’s most exciting areas.