Between renovation backlog and investment opportunity: Educational real estate is becoming a strategic asset class

"Social infrastructure is one of the largest and most liquid real estate segments in the Nordics. Because state-owned tenants ensure long-term and reliable cash flows, these properties remain tradable and attractive for investors even in times of crisis," says Feldt.

The need for investment in the German education sector has been growing for years. At the same time, many municipalities are coming under increasing financial pressure. For institutional investors, this opens up a market that combines social relevance with long-term stable returns. Long-term leases, often public or publicly funded users, and indexed leases ensure predictable cash flows and an attractive risk-return profile. Depending on the location, property quality and user structure, yields on school properties are currently between around 3.8 and 5.9 percent, which is at a level that is attracting great interest from institutional investors in the current market environment

"Educational real estate combines social impact with economic stability. Long-term leases, inflation-protected income and the high creditworthiness of many users create a risk-return profile that institutional investors are increasingly demanding, especially in volatile market phases," says Tanja Volksheimer, Managing Director and CIO of NEXT Generation Invest.

According to Volksheimer, the German market is still at the beginning of a development that is already much more advanced in the Nordic countries. "Today, educational infrastructure encompasses much more than schools. Academies, further education centres, libraries or mixed-use educational campuses will play an increasingly important role in the future," she explains.

She also observes a growing openness on the municipal side. "The cooperation between the public sector and private investors is much more professional today than it was ten or twenty years ago. Both sides are increasingly meeting at eye level."

A current project by CELLS in Frankfurt am Main shows how educational infrastructure can be created more quickly. There, the former headquarters of Deutsche Börse, most recently used by Commerzbank, was converted into a school campus with over 40,000 square meters of space for several thousand students. Today, the property is leased to the city of Frankfurt am Main for 30 years.

"We recognised early on that many office properties outside the top locations would come under pressure in the long term. That's why we have started to develop alternative uses that meet sustainable needs," says Jan Trenn, CEO of CELLS.

The Frankfurt school campus was built within just two and a half years. In the final stage of expansion, 3,200 students with 290 teachers will learn here. "When a municipality develops a new school site on a greenfield site, it is not uncommon for ten years or more to pass before completion in the case of a development plan procedure. By converting existing buildings, urgently needed school places can be created much faster," explains Trenn.

In addition to the time saved, he also sees ecological advantages. "The preservation of existing buildings saves enormous amounts of grey energy and prevents demolition and new construction. Educational properties can therefore also make an important contribution to sustainable urban development."
At the same time, demand is secured in the long term. "For metropolitan areas such as Frankfurt, we expect continued population growth and increasing demand for educational infrastructure. This is exactly where the most attractive investment opportunities are created."