In the first of a series of reports from Germany, Reiner Nittka, CEO of GBI AG, looks at the rapid growth of the country’s serviced apartment sector.
Barely ten years ago concepts such as “serviced apartments” and “business living” would have drawn blank looks in the hotel and accommodation sector in Germany. While this type of lodging was already commonplace in Great Britain, the United States and many Asian countries, people in Germany tended to stay almost exclusively in traditional hotels, even for longer periods of time. There were very few kinds of accommodation that offered travellers a kitchen, a place to work and other amenities. In 2005, when GBI AG held its first talks with Citadines in Paris about serviced apartment projects in Germany, we were lone pioneers among German project developers.
Today, there is a boom in the serviced apartment sector in Germany, both among the brands entering the market and among investors looking for suitable properties for their portfolios. This is attributable to Germany’s strong economic performance, the dynamic changes in the world of work and the general housing shortage. Serviced apartments are an attractive form of accommodation for a broad range of highly skilled people who are away on business for several weeks or months, are involved in a project in a different city for a while or are undergoing an extended period of further training. Serviced apartment projects also benefit from the very tight situation in the classic residential market in many German cities. This explains why professionals who are changing jobs, for example, and many new arrivals from abroad first rent a serviced apartment and use it as a base from which to find accommodation of their own.
This trend is now readily apparent. As Germany’s largest project developer in the hotel sector, we increasingly support international serviced apartment brands on their entry into the German market. Citadines and Adina are being followed by Frasers and more will follow.
The potential for future growth in the number of guests is enormous. Approximately 33,400 serviced apartments are currently in operation in Germany (around 3.5 per cent of hotel rooms). According to the market report drawn up by analysts of the Berlin consultancy Apartmentservice, that number will triple to 100,000 by 2030. Other research teams anticipate even higher growth rates – especially if Germany continues to boom as a location for overnight stays.
These encouraging trends have prompted many large international chains to expand into Germany and diversify their brands. Accor was first off the mark with Adagio and Adagio Access. Ascott is following in its footsteps: Citadines, which is already present in Germany, is being joined by Lyf, a brand that is well established in Singapore. This is a young lifestyle concept with smaller rooms and higher space efficiency. Frasers is also starting in Germany with several established brands from Asia. In addition to Capri by Fraser, which was developed by GBI AG and has already opened in Frankfurt, the company is expanding in Germany with its high-end Frasers Suites and the lower-priced Modena by Frasers brand. Adina, meanwhile, has just introduced its new leaner concept Adina Apartments.
Also eagerly awaited are the first properties of the serviced apartment brand Zoku which has already gone down well with guests in Amsterdam. This is due, not least, to its many creative ideas and highly flexible floor space concept. The lobby with all the public areas plus an outdoor terrace is located on the top floor, for instance. Mixed hospitality projects are also coming to Germany. From 2019, Student Hotel in Berlin will rent 457 rooms to business travellers or tourists on a daily basis as well as to students for several months. The groups of customers are well networked via co-living studios. All these are examples of how attractive the German market has become for creative international companies.
A special feature of the German market is that not only large cities are of interest as locations for serviced apartments. Thanks to the country’s federal structure and the many hidden champions of the “Mittelstand”, the prospering medium-sized companies which form the backbone of the German industry, this also applies to smaller but economically vibrant cities. Adina is already considering German B cities for further expansion. From our point of view, locations such as Bonn, Dresden, Hanover, Karlsruhe, Leipzig, Mannheim, Wiesbaden and Wolfsburg are also very well suited for serviced apartments. In other words, prospects are excellent wherever there is great economic dynamism and the rental market is under pressure. Even some C and D cities can be considered if, for example, large local employers generate a great deal of demand.
Demand in Germany is high and the budget segment in the long-stay sector still has untapped potential. This applies to facilities which enable travellers to live in a well-equipped serviced apartment for under 1,000 euros a month. Last year, GBI AG opened two more SMARTments properties in this price category in Berlin. Our SMARTments have been fully booked from day one with guests staying for an average of 70 days. Large corporate customers from the healthcare and software industries as well as start-ups ensure good planning. Our SMARTments business brand will soon also be represented in Munich, Hamburg, Vienna and Mannheim.
The SMARTments business projects we have completed to date have all been sold to insurance companies, pension funds and a family office well before construction started. Small wonder that demand has grown. The track record of the established serviced apartment brands is improving all the while. STR Global has established its own research category for the segment and many consultants are now dealing intensively with the German market.
Let us look forward, then, to a very dynamic market and many new entrants.
