Alternative investment in residential properties

Information for investors and landlords in Hamburg: What are micro-apartments?

Micro-apartments typically refer to small rental units with a living area of 30 square meters or less, offered to tenants fully furnished. This eliminates the need for tenants to purchase their own furniture, appliances, or other household items. These micro-apartments are usually found in large rental complexes with a high number of units, which can include up to 300 small apartments. Consequently, they are primarily a commercial investment option, as private investors rarely have the capital to finance such a volume of units.

Micro-apartments often come with additional services, such as pre-installed internet access, laundry services, or access to shared work or fitness spaces. When renting, micro-apartment complexes are characterized by high living quality, very central locations, good transport connections, and an uncomplicated moving process for tenants. These features appeal to a young, flexible, and dynamic demographic who see the limited living space as compensated by the numerous features offered. Students, expats, young professionals, and successful creatives are generally the most attracted to micro-apartments.

For investors, the micro-apartment asset class reveals a number of peculiarities: Due to the combined offer of rent and additional services, micro-apartments do not fall under the rent control law, allowing the local comparative rent for new leases to exceed more than 10 percent. Monthly rents of 25 to 30 euros per square meter are quite feasible with micro-apartments. Engel & Völkers Hamburg real estate agents estimate a return expectation of 5 to 6 percent, assuming a solid investment strategy is in place.

Our real estate agents’ assessment: What characterizes the successful rental of micro-apartments

In most cases, micro-apartment complexes are not directly managed by the owner but by an intermediary operating company. The security and profit expectations of micro-apartment investments are closely tied to the efficiency of this company, which is responsible for both collecting rent and providing services, and it transfers a regular sum—such as through a lease—to the owner. To keep the risk of failure low for the investor, Engel & Völkers Hamburg’s real estate agents have observed that long-term contracts of 20 years or more, along with extensive corporate guarantees, are often established. For a successful investment in Hamburg micro-apartments, maintenance and repairs for wear and tear, which are naturally more extensive due to high tenant turnover compared to traditional residential buildings, should be included in the operator company's responsibilities. This helps keep the ongoing rental costs low for the investor.

As a qualified real estate agent in the commercial segment, Engel & Völkers Hamburg can look back on decades of successful project management with various investors. Thanks to our in-depth strategic consulting in the areas of traditional residential and commercial buildings, as well as other investment property concepts, numerous rental projects have already been realized in Hamburg and the surrounding areas. Take advantage of our expertise, our extensive network of contacts, and our always up-to-date market knowledge, and choose to partner with Engel & Völkers Hamburg for your real estate investment. Our real estate agent team is happy to offer you an individual initial consultation.