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The European real estate fund market quietly crossed a significant milestone in 2024, with net fund assets surpassing €1 trillion by the end of the third quarter. According to data from European Fund and Asset Management Association EFAMA, these assets grew by €26.8 billion—a modest 2.7% increase—despite challenges such as net outflows of €2.2 billion during the first nine months.
Rudolf Kömen, Conducting Officer of INTREAL Luxembourg, highlighted this achievement, noting, "The modest increase during 2024 is remarkable, given that investment funds reported a net cash outflow. Stabilising price levels in the real estate markets largely explain this growth in fund assets."
While countries like Ireland and Switzerland enjoyed substantial inflows (€1.2 billion and €782.8 million, respectively), others, including Germany, Austria, and the UK, recorded significant outflows. Statistically, the number of regulated European real estate alternative investment funds (AIFs) rose to 3,949 by the end of Q3, up by 38 funds compared to the previous year.
Kömen anticipates a brighter 2025 for Luxembourg's fund management industry: "Institutional investors are poised to drive cash inflows next year. We are already preparing several fund launches, with some at an advanced stage. Private investors may take longer to return than institutionals, as they tend to adopt a more cautious approach."
INTREAL’s Luxembourg operations have become instrumental in attracting international capital by offering customised fund structures designed to meet the unique requirements of non-German companies. Kömen explained, "Luxembourg's regulatory framework provides unmatched flexibility and efficiency, offering a one-of-a-kind platform for fund structuring, combining regulatory flexibility with global connectivity—a key advantage for our international clients."
In 2024, INTREAL Luxembourg focused heavily on launching new funds, adapting to the varied demands of institutional investors across Europe. "Our focus has been on tailoring fund structures that not only align with market realities but actively address investor needs for flexibility and compliance," said Kömen.
Camille Dufieux, Managing Director of parent company INTREAL in Hamburg, brings a long-term perspective to the group’s strategy. Reflecting on her leadership role in a recent interview, she remarked, "We are navigating some of the most challenging times since the financial crisis. These challenges demand creative solutions and a proactive approach to innovation."
Dufieux highlighted the importance of diversification in INTREAL’s service offerings. "Real estate is no longer the sole focus for many institutional investors," she noted. "Institutional investors are increasingly diversifying into infrastructure and private debt, and we are leading the charge in adapting our services to meet this growing demand."
In line with this vision, INTREAL has launched REAX Advisory GmbH, a subsidiary specialising in consulting services. "By expanding into consulting and creating key roles within the company, we’re setting new benchmarks in the industry," Dufieux added.
With stabilised prime yields and signs of market recovery, both Kömen and Dufieux foresee 2025 as a year of 'cautious optimism'. Institutional investors are expected to dominate, driven by value-add opportunities and strategic partnerships.
"Our focus remains on delivering tailored solutions that align with our clients’ evolving needs," Kömen emphasised, pointing to INTREAL Luxembourg’s growing role as a bridge between international capital and European real estate opportunities. "The increasing importance of Luxembourg in our operations underscores our ability to adapt and thrive in a competitive environment," he added.
Dufieux concluded by reflecting on the broader industry’s trajectory: "The past year challenged us to redefine what resilience looks like, compelling us to find smarter, more efficient ways to serve our partners."
The micro-living sector in Germany is thriving, defying broader real estate challenges with high demand and steady growth. According to the latest report from the Micro-Living Initiative, rents in the segment have risen by 8% since spring 2024, with all-in rents now averaging €584 per month. These rents, which include utilities, internet, and furniture, are expected to grow by an additional 4–6% annually over the next three years. Occupancy rates remain robust at 95%, demonstrating the sector’s ability to meet the growing demand for flexible and compact living spaces.
Felix Embacher of research group bulwiengesa explains that “the demand for small-scale residential forms remains unbroken,” driven by demographic shifts, urban migration, and rising energy costs. Berlin, Frankfurt, and Munich have emerged as key hotspots for micro-living developments, with Berlin alone accounting for over 3,000 units currently under construction.
The Micro-Living Initiative, founded in 2020, plays a central role in this market. The platform unites major owners, operators, and managers of apartment buildings in Germany, and currently includes 14 companies that are active in the German market for apartment living: aam2core, berlinovo, City Pop, Commerz Real, Cube Life, DEMIWO, FU.Life, Greystar, HanseMerkur Grundvermögen, iLive, Krams Immobilien, REOS, talyo. and Union Investment. Collectively, its members manage nearly 28,000 residential units and aim to improve transparency and innovation in the micro-living segment.
Micro-apartments cater to an increasingly diverse tenant base. While students still make up 37% of tenants, the segment’s appeal has expanded to include young professionals, commuters, and senior citizens. Young professionals and project workers are increasingly drawn to micro-living for its flexibility and convenience, while senior citizens value the barrier-free designs and services tailored to their needs.
Urbanisation and Demographics: Single-person households are on the rise, driven by migration to urban centres for education and work. According to Cushman & Wakefield, cities like Berlin and Munich are seeing particularly high demand among tenants aged 18 to 39.
Economic Pressures: Rising energy costs and housing shortages make smaller, more efficient living arrangements attractive. Simon Jeschioro, head of capital markets at Cushman & Wakefield, highlights the predictability of all-in rents as a key draw for tenants facing volatile utility prices.
Lifestyle Shifts: Increasingly, tenants are choosing micro-living as a lifestyle choice rather than a necessity. Modern amenities such as co-working spaces, gyms, and community areas are transforming these apartments into hubs for convenience and connection. Anja Müller of 360 Operator explains how targeted services like international student support have boosted occupancy rates from 67% to 98% in underperforming locations.
Micro-living has proven remarkably resilient, even as broader real estate markets face big difficulties. Operators like The Base and 360 Operator report near-100% occupancy rates. For example, The Base Berlin One, a conversion of a former GDR Ministry building, is fully occupied with 275 residential units, demonstrating the strong demand for adaptive reuse projects. Returns for landlords remain attractive, with Jan-Bastian Knod of Cushman & Wakefield noting that micro-living projects still yield 50 to 100 basis points higher than traditional residential properties. "The shrinking development pipeline and strong occupancy rates are supporting stable returns for operators," Knod explains.
Similarly, Lars Vandrei of Catella Residential Investment Management highlights that all-in rents, despite appearing higher on a per-square-metre basis, offer better operational efficiency and tenant satisfaction due to bundled services and modern amenities. Florian Färber, CEO of The Base, echoes this with examples of recent successes: "Our Base Berlin Funky project combines communal spaces and flexible leasing terms, ensuring nearly 100% occupancy within weeks of opening." He adds that adaptive reuse of office spaces has been a critical strategy, citing their ability to quickly pivot during market shifts as a key to maintaining profitability.
Institutional investors have been quick to capitalise on the sector’s appeal. Catella Residential Investment Management has acquired several micro-living properties for its ‘Catella Wohnen Europa’ fund, while Union Investment has backed large-scale developments in Frankfurt. These transactions underscore the sector’s ability to deliver reliable cash flow and attractive yields, even as yield premiums over traditional residential properties narrow to 50 basis points.
Jeschioro of Cushman & Wakefield also notes, “the previous yield premium of micro-living over traditional residential properties has narrowed, reflecting investor confidence in the segment’s stability.”
Despite its strong performance, the sector still faces notable hurdles. High construction costs, rising interest rates, and slow permitting processes have constrained new supply. Many developers are turning to adaptive reuse projects to meet demand. Examples include The Base Berlin One and Stayurban Residences’ conversions of office buildings into residential complexes. However, these projects often face obstacles such as meeting modern energy efficiency standards and managing logistical complexities.
Affordability, too, remains a concern. Critics argue that the segment’s focus on higher-priced units limits accessibility for lower-income tenants. With average all-in rents of €584 per month, many students and young professionals may struggle to afford these units, exacerbating inequality in urban housing markets. Matthias Anbuhl, Chair of the German National Association for Student Affairs, remarks, “affordable housing for students and young professionals remains a glaring issue, despite the growth of micro-living.”
The sector continues to evolve, integrating innovative concepts to address diverse tenant needs. Hybrid models like The Base Berlin Funky combine residential units with hotel-like services and communal spaces such as fitness studios and co-working areas. Meanwhile, Stayurban Residences is focusing on senior-friendly designs, incorporating barrier-free layouts and on-site care services.
Adaptive reuse remains a cornerstone of supply expansion. Projects like The Base Berlin One exemplify how unused office spaces can be transformed into vibrant micro-living communities. Over 40 new projects, representing 5,000 units, are slated for completion by the end of 2025, with the majority concentrated in urban centres and university towns.
Bulwiengesa's Embacher concludes, “the demand for small, flexible living spaces is here to stay. We see continued opportunities for growth, particularly in urban centres and university towns.”
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