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New living space in Kreuzberg: micro apartments for students and singles!
The conversion of the Markgrafenpark in Kreuzberg into micro-apartments is intended to create urgently needed living space. Find out more about plans, challenges and market developments.
New living space in Kreuzberg: micro apartments for students and singles!
The conversion of an office complex on Rudi-Dutschke-Straße in Berlin-Kreuzberg into living space has attracted the attention of politicians and urban developers. PGIM plans to convert Markgrafenpark into a residential area in the coming years and is relying on several hundred micro-apartments. This transformation also includes a student residence with up to 435 apartments, as well as common areas, study rooms and a fitness studio. In total, the Markgrafenpark offers around 14,000 square meters of gross floor space, some of which was previously rented to a health insurance company.
The property is located in a mixed area where living is permitted according to the regulations of the Friedrichshain-Kreuzberg district office. The requested change of use is currently being examined, with political representatives divided. While some welcome the development, others express concerns that micro-apartments will not be able to significantly reduce the acute shortage of traditional housing.
Challenges of transformation
The renovation of the Margrave Park faces various challenges. These include the new fire and sound insulation requirements as well as the requirements for energy standards. Although there is no concrete information about future rental prices, it can be assumed that they will be in the upper segment. The so-called “seepage effect” is also mentioned in the discussion about this project. Critics doubt that this will actually work in a tight housing market like Berlin.
Current trends show that the demand for micro-apartments in Germany is constantly increasing. Cushman & Wakefield's report, "Microapartments 2024: An Asset Class Comes of Age," shows that the average number of residential units per project has increased from around 100 (2021) to 158 (2023), indicating a growing interest in larger, more efficiently built apartment buildings. These developments can be observed particularly in large cities and university cities such as Berlin.
Demographic changes and market developments
Demographic changes, particularly the immigration of younger and older people, are contributing to the increasing demand for microapartments. Germany reached a record high of 84.7 million inhabitants in 2023, with special age cohorts, particularly people aged 18 to 39, contributing significantly to demand. At the same time, the proportion of international students has increased: from 11.3% in 2012 to 15.7% in 2022.
These demographic factors coincide with a tight rental market characterized by tight supply. Declining approvals and completions are further exacerbating the situation. Numerous micro-living projects have come into development and planning in recent years, but completion is lower than expected. In 2021, around 500 micro-living projects were in various stages of implementation, while in 2022 only 100 projects were under construction.
Market researchers estimate that increasing interest in senior-friendly micro-apartments that are barrier-free and equipped with additional services will lead to further improvements in the offering in the coming years. Operators of such projects are increasingly focusing on central locations, good connections and comprehensive service packages, which is reflected in the average net rent. In Germany in 2023 these were 20.00 euros/m², while in the so-called A cities they were 29.50 euros/m².
Overall, it is clear that the asset class of micro-apartments is increasingly of interest to both national and international investors. Yield premiums compared to traditional residential properties have fallen, suggesting that microapartments represent a serious alternative in today's housing market. PGIM sees the conversion of Markgrafenpark as a test case for the conversion of office space, and the developments in Berlin could be groundbreaking for similar projects in other German cities. Further information can be found at Development City, Cushman & Wakefield and The Property Post.