Residential assets in general, and student housing in particular, have shown their resilience this year, experts agreed at Real Asset Media’s European Outlook – Germany briefing, which was held online recently.
“We have shifted our focus to core and core-plus and to residential assets,” said Nils Hübener, CIO, Corestate Capital Group. “We have a positive view of student housing and much more needs to be built in Germany. There’s a lot of interest on the investor side across Europe because it’s recognised as a sector that will benefit from the economic crisis.”
In times of downturn and high unemployment, people invest in their education and qualifications. Another positive factor for the demand side is that in German cities many young professionals choose to live in student accommodation.
“Resi has done better than most asset classes this year in Germany, and rented resi has been the best performer,” said Samuel Vetrak, CEO of Bonard, the student housing data and market research specialists. “In European student housing, occupancy rates have declined by 10%, but in Germany they have gone from 98% to 95-97%, showing how resilient the asset class is.”
Institutional investors, especially from the US, target student housing in Germany, he said, because even if yields are low and returns not spectacular, the asset class offers scale and very limited risk.
Operational real estate
“We see a significant increase in allocations to operational real estate like resi, outpacing the growth of allocations to offices,” said Iryna Pylypchuk, director of research and market information, INREV.
Banks are on board too. “Everyone is eager to finance residential because it’s so stable,” said Assem El Alami, head of real estate finance, international key accounts and syndication, Berlin Hyp. “We also like student housing and are happy to finance it.”
But it is important to look at the single asset, he said, because student housing in a small university town may not be that attractive, but an asset in a place like Berlin, that can be turned into business stay or micro-living is a great investment.
Tech on the rise
Looking ahead, “resi has dominated in 2020, but it will be replaced by tech in 2021,” said Thomas Veith, partner, leader real estate/real assets, PwC. “Resi will remain high on the agenda, but many investors want secure cash flow and are opting for tech-driven asset classes like data centres, energy infrastructure and communication towers.”
The problem with investing in data centres in Germany is the lack of supply.
“In the US and Asia they have large data centres REITs, but there is no such thing in Europe,” he said. “Europe-wide platforms may come in the future. After all, ten years ago logistics was a very fragmented sector, but now we’ve seen consolidation and many big ticket deals.”
New sectors are coming up, but it’s too early to write off offices, said Carsten Loll, partner real estate, Linklaters: “There’s still demand for offices and younger generations want to mix, mingle and share. In 2021, if there’s a vaccine, all that positive energy will be released. I want to be in Berlin for that party.”