There will be more activity and consolidation ahead in the student housing sector, experts agreed at Real Asset Media’s Student Housing, Micro-living and Co-living investment briefing, which took place online this week with over 780 participants from 40 countries.
The current crisis due to coronavirus ‘is a hiccup along the route,’ said Douglas Edwards, Managing Director, Head of Equity Raising & Client Service, CORESTATE Capital Group. ‘Capital is very active in the sector, there is great interest in Europe and also in Asia because the positive trends are clear. All the fundamentals, such as demand and income, are still there’.
Some things have changed in the market in the past few weeks but some have not. ‘Some fundamentals factors have stayed the same,’ said Rainer Nonnengässer, Chief Executive Officer, International Campus. ‘Interest rates are low, there is a lot of liquidity in the market and the imbalance between offer and demand remains’.
The current situation offers a chance to be more active and look for opportunities, he said: ‘We see no great price dips in student housing, but in the hospitality sector there could be developments that are stuck and could be transformed into student accommodation or micro-living’.
Looking ahead, there is likely to be more regulation in the sector as well as an additional increase in operating costs, which will drive activity.
In the short-term people will tend to hunker down, said Philip Hillman, Chairman, Living Capital Markets, JLL: ‘Some investment committees will be reluctant to go for expansion, so companies will focus more on markets where they already have a presence to build critical mass and achieve potential cost-savings, which are important as operational costs are likely to increase’.
The consolidation trend is likely to pick up in the next few months as the crisis hits the most vulnerable.
‘I see a lot of consolidation and mergers ahead in the sector,’ Hillman said. ‘Student housing is a very resilient sector but there will be some distress in the future, although we are not seeing distress yet’.
Some operators are small-scale, some have quite a few development projects that are likely to be delayed, he said, and not all of them have strong financial backing to allow them to absorb the hit from the rental gap in the spring/summer term.
According to a snap poll conducted by Real Asset Media among delegates, 62% believe student housing to be the most resilient sector, with 27% opting for micro-living and 11% for co-living.