The student accommodation sector has reached a size and a level of liquidity that make it attractive to large institutional investors, experts agreed at Real Asset Media’s Student Housing & Micro Living Investment Briefing, which took place at MIPIM.
‘We see larger deals now being done that lead other investors to look at the sector because they see that they can put significant amounts of money to work,’ said Christian Scheuerl, Managing Director, MPC Micro Living Development.
‘We have a transaction volume that has reached a level of attractiveness for institutional investors, who are not interested in €10 mln deals,’ he said. ‘We see serious portfolios being formed now’.
It took time to get to this virtuous circle, but not there is no going back.
‘For large institutional investors to get interested you have to have opportunities of scale and student housing used to be too granular. But at the moment everyone is in the process of aggregating these portfolios and building them up to create scale,’ said Brian Welsh, Chief Executive Officer, The Nido Collection.
‘What we have seen in the last couple of years is way bigger tickets of capital coming into the market and looking for capital,’ said Rainer Nonnengässer, Chief Executive Officer, International Campus. ‘Ten years ago you wouldn’t have been able to find something to buy for €100 mln in Germany, but now the market is more mature. I would be surprised if there wasn’t more consolidation ahead’.
Investors who have substantial sums to invest know that a development project would take several years, so they prefer to pick up ready product in the market, he said, and then create portfolios to achieve scale.
‘All those institutions who wouldn’t answer the phone to us a few years ago now are running around talking about student housing’, said Welsh.
The Micro Living sector, targeted at young urban professionals, has not reached the scale and solidity of student housing yet, said Scheuerl: ‘There are many products out there that are called micro living and operators are experimenting with these forms of living, so we are still in a transition phase’.
But it will happen and institutional investors will come on board just as they have done with student housing, he said: ‘It is just a matter of time’.
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