Partners Group is exploring the millennial-driven opportunity in micro-housing, as both rents and populations continue to rise in Europe’s urban centers.
The Zug-based private markets investment firm picked out the niche residential property type as an area of future interest in its H2 2017 Private Markets Navigator published on Wednesday.
“To address rising population densities combined with higher rents and land prices, one of the concepts they are discovering is micro-housing, a way of living that Japan and other Asian countries embraced a long time ago,” Partners wrote. “We are currently evaluating potential investments in the micro-housing sector in northern Europe’s larger cities.”
Partners noted that demand for “affordable and convenient living” is concentrated in cities such as Frankfurt, Berlin, Stockholm and Copenhagen, where young, mobile residents spend much of their time outside the home. Micro-units are typically less than 645 square feet, with a sleeping area, cooking area and living room.
“To address rising population densities combined with higher rents and land prices, one of the concepts they are discovering is micro-housing, a way of living that Japan and other Asian countries embraced a long time ago”
– Partners Group
In July, Partners inked a deal with Stockholm-based developer SSM to build 1,700 apartments in Stockholm for €700 million, some of which will be micro-units, a spokeswoman said.
Other Swiss managers are capitalizing on the demand for cheaper, smaller units. In October, Corestate Capital, the Switzerland-based private equity real estate firm, was handed a €500 million mandate by Bayerische Versorgungskammer to invest in micro-apartments in Europe, PERE previously reported. The special fund, BVK-Residential Europe-Immobilienfonds Corestate, is investing in micro-apartments in student housing properties in European university towns, with a focus on Germany and Austria.
Against the backdrop of record levels of dry powder, Partners is bullish on overall global transaction levels, which the firm expects to rebound to 2015 levels.
“We continue to believe that a number of ongoing transformative trends are driving real estate demand on a global scale: demographic shifts are impacting residential and office occupier requirements; new urbanization is influencing property design so that it caters to ‘live-work-play’ lifestyles; and shifting global consumer demands and the resulting growth in e-commerce are changing retail and logistics demand,” Partners wrote in the report.
For specific investment opportunities, the firm is focusing on value-added offices in major cities; developing class A apartments and upgrading class B apartments in urban centers; and warehouses in markets with strong demand for infill property.
Partners is currently raising its latest private real estate secondaries fund, netting €1.2 billion in a first close against a €2 billion hard-cap for Partners Group Real Estate Secondary 2017 earlier this month, PERE previously reported. The firm is expecting a final close around the end of the year.
Overall, the firm managed €57 billion across strategies, including private equity, private real estate, private infrastructure and private debt, according to Wednesday’s report.