Student Housing has become the number 1 alternative asset class out of 19 in terms of volume, with over 700 companies investing in the sector, delegates heard at Real Asset Media’s Student Housing, Micro & Co-Living investment briefing, which was held at the International Investors’ Lounge at EXPO REAL recently.
‘There is a wall of capital ready to be deployed and a pipeline of €10.6 bln of new projects in Europe,’ said Samuel Vetrak, CEO of Bonard. ‘The only problem is that it is difficult to find the right product to invest in’.
The sector took off in the US first, then in the UK and now it is having an impact in Continental Europe, growing well beyond its initial niche status.
It is attractive to investors because it is mature and transparent and because ‘it will continue to deliver in economically challenging times,’ he said. ‘International student demand remains strong and consistent regardless of the cycle’.
Demand is high and rental growth has been above inflation. ‘In some hotspots like Dublin or Porto we have seen double digit growth,’ Vetrak said. Iberia, the Netherlands, Germany and Italy are the main markets for new development, along with the UK where investments are set to grow because of the weakness of the pound and a loosening of regulations.
The UK has a bed-to-student ratio of over 25%, while in Continental Europe it is just 13% and as low as 5% in some cities.
According to new data presented by Bonard, an independent research provider that specialises in alternative asset classes, 1.1 million student beds need to be built in Europe to keep up with the UK. The current pipeline of 592 projects, which represent a €17 bln investment, will deliver 151,000 private beds in the next two and a half years.
Vetrak identified three distinct markets that can appeal to different investors. The first is super-sized cities with over 30,000 international students. In Europe they are Paris, Vienna, Madrid, Berlin and London, which is way ahead with over 110,000.
The second is big cities with a student population of between 15 and 30,000, which include Munich, Rome, Barcelona and Budapest. The third is mid-sized cities with between 5 and 15,000 international students, such as Amsterdam, Frankfurt, Oslo, Heidelberg and Turin.
Opportunistic investors focused on returns rather than volume will opt for the niche cities, while institutions wanting big-ticket items will focus on the super-sized cities.