Briefing: Residential a defensive play in uncertain times

Student accommodation provides a stable, income-producing product that delivers higher yields than other comparable asset classes with less risk

The challenges facing other sectors are pushing investors towards residential and in particular towards student accommodation, experts agreed at Investment Briefings’ European Student Housing & Micro Living panel, which was held in London on Thursday at the City offices of Squire Patton Boggs.

‘The intensity of demand will not diminish,’ said Andrew Allen, Global Head of Investment Research Real Estate, Aberdeen Standard Investments. ‘For institutional investors coming from retail, which has been disrupted by e-commerce or from offices, which have been disrupted by WeWork, the fundamentals of student housing are very attractive.’

As the real estate cycle comes to an end, the sector seems like a good defensive play.

Student accommodation provides a stable, income-producing product that delivers higher yields than other comparable asset classes with less risk, said Rainer Nonnengässer, CEO of International Campus Group: ‘Putting all these factors together it is a brilliant product for a global investor looking to diversify. That is why it is no longer a specialised product, and the constant themes now are growing liquidity and scarcity of product.’

Given the growth in international student numbers, increased student mobility and the gap between supply and demand, there are good reasons for investing. Given the lack of supply, though, there is a case to be made for going into development.

‘All the winning cities in Europe are growing and need more resi,’ said Allen. ‘My advice would be to get involved in creating product. If you build the right building, you can be sure to fill it. Some forward commitment can really deliver results.’

When investors have a look at the demographic and economic trends of a city before committing their capital they will find that a little homework can make a big difference, said Nonnengässer: ‘Examine the prospects over the next five years, with help from people on the ground. Be selective but adventurous, try to be ahead of the curve, take more risks.’

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