Colliers Copenhagen Property Market Report 2019

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Copenhagen Property Market Report 2019

IN FOCUS: Student housing

As yield compression has driven down net initial requirements in the traditional housing market to unprecedented lows, investors are increasingly shifting their investment focus to include alternative housing as well. The market for student housing in particular has developed substantially in recent years. Although student housing is by no means a new phenomenon, the mindset of developers and investors in this segment has fundamentally changed. In 2017, some 116,000 students, enrolled in higher education courses, resided in Copenhagen. However, the number of student hall rooms totalled 15,175 that year. Some students occupy traditional student hall rooms, others live in lodgings in the private housing market. A couple of years ago, a Nordea analysis revealed that approximately 28% of young students still live at home with their parents. Comparing the number of all students residing in Copenhagen and the number of beds belonging to the student housing stock, which includes student halls and student-friendly flats (bedsits of less than 55 sqm), makes for a student-to-bed ratio of 77. This means that for every one hundred students, only 77 have a student-housing bed. However, when excluding student-friendly flats, the ratio is approximately 14, underpinning the shortage of student housing units in Copenhagen. The substantial shortage of student housing has made students more willing to accept higher rents. In a historical context, afforda- bility in this segment has been determined largely by the level of educational grants and loans offered by the Danish state, possibly supplemented by wages from student jobs. In 2019, students living in lodgings are eligible for monthly student grants in the amount of DKK 6,166 before tax, typically taken as a proxy measure denoting the maximum rent affordability threshold. As affordability and student grants are positively correlated, the rent levels of new student housing units are not based on the rent per sqm recorded in the traditional housing market. This means that prime rents in the student housing segment are some DKK 2,500 per sqm for small units offering attractive gross-to-net area ratios.

As mentioned, developers and investors have started to seri- ously rethink student housing concepts. As a result, the focus is not only on small individual residential units but also on commu- nity space, including cafés, workout facilities, gaming rooms, etc. BaseCamp has already introduced a new concept that involves workout space, event rooms and other communal space. In addi- tion, UMEUS is set to introduce a new student co-living expe- rience in 2020, offering similar facilities and a strong focus on communal space. Investor demand for existing and newly constructed student housing has been mounting in recent years. This trend is expected to continue in 2019, fuelled by the continued expansion of sector specialists that introduce new concepts to the Danish student housing market. 77 Student-to-bed ratio DKK 2,500 per sqm p.a. Prime student housing rent