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Rainer Nonnengasser: We’re investing €1bn in PBSA – this is why

International Campus executive chairman Rainer Nonnengässer tells Paul Strohm how the student accommodation operator plans to expand over the next two years.

It has been a testing 15 months for the purpose-built student accommodation (PBSA) sector. But the main players – 
its investors and operators on one hand and the student customers/tenants on the other – have stayed loyal to the cause, despite the obvious barriers to international travel that have restricted demand from foreign students, one of the more lucrative areas of the business.

Earlier this year International Campus Group, which specialises in temporary living accommodation for students and micro-living space for professionals, announced plans to invest €1 billion over the next 24 months to expand its portfolio to more than 10,000 beds. The group has over 5,800 apartments in operation and development in Germany, Austria, Netherlands and the Czech Republic and has a pipeline of more than 5,000 beds.


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The company also promoted former chief executive officer Rainer Nonnengässer to executive chairman, a new role, and brought on board former Oxford Properties MD Gawain Smart to replace him as CEO. He had previously spent over a year advising IC and its majority shareholder Brookfield. Both appointments became effective on 1 June.

Nonnengässer explains to Real Asset Insight how International Campus Group and the PBSA sector in general have fared since the onset of the pandemic.

“A lot of continental European markets have seen their universities going online and economies went into lockdowns after summer last year, so everybody tied to the higher education system was affected,” he says. “And, depending on which market you’re looking into, effects have been stronger, or less significant, as in Germany and Austria and also the Netherlands, where we are active.” 

Nonnengässer says the sector has proved to be resilient because the way rental contracts are structured has enabled providers to meet their tenancy requirements. “And a lot of young people have chosen to stay on the PBSA schemes instead of going back home.”

Preparing for university return

In IC’s case, above 50% of tenants chose to remain physically present at the facilities even during periods of hard lockdowns. 

“Everybody had to deal with the consequences, but we have been quite lucky not to have had significant cases of infection,” says Nonnengässer. “Like others we had some, but nothing severe and now we are actively preparing for the universities to go back to offline, or at least hybrid working, in autumn this year and we are keeping our fingers crossed that this will happen.” 

While some countries have made their plans public, others are more reticent to do so in the face of fluctuating Covid-19 infection rates.

‘The perception of PBSA currently is it has proven, in the last 18 to 24 months that it’s delivering stable rental flow, that it has proven to be relatively resilient but also in absolute terms compared to other asset classes like hospitality or retail.’

Rainer Nonnengässer, International Campus

“We are well prepared to absorb the next wave and I expect this to be a double wave because there’s the first year students of 2021 and a significant portion of 2020 first-year students who stayed at home because their semester start pretty much collided with lockdowns and they are now desperately looking to get away from home and to feel and absorb the real lifestyle of being a student.” 

IC’s plans to invest €1 billion in the next two years have also withstood the disruption caused by the pandemic. “If you look into the acquisition side we are still on a very strong growth path,” Nonnengässer says. “We still see a strong pipeline and we see very good prospects for meeting our acquisition targets.”

He says different factors have played their part in this. Notably, the absence of many intercontinental buyers due to travel restrictions that meant onsite due diligence was difficult to carry out. But IC has also been very active in promoting itself within the market and letting people know that it believes in  the sector and is focused on the strong growth of its portfolio.

“These factors together mean that we’re doing pretty well on the acquisition side these days,” says Nonnengässer. 

Core city focus

The group is still focused on countries in which it was already active, particularly Germany, the Netherlands and Austria. “We are quite effective in Vienna and are trying to evolve our Vienna portfolio into an Austrian portfolio, looking quite actively into Linz, Graz, Innsbruck and Salzburg. In Germany we are not only focusing on the Big Seven.”

Last year IC made an acquisition in Frankfurt, it has bought in Bonn and earlier this year in Freiburg. “Germany allows for, let’s say, a blend between strong economic centres plus well reputed student spots which are sought after by international students,” he explains.

International Campus has more than 5,800 apartments in operation and a pipeline of more than 5,000 beds


The flow of capital has also been supportive to IC’s plans. “Demand is international and capital still sees this sector as defensive. The perception of PBSA currently is it has proven, in the last 18 to 24 months that it’s delivering stable rental flow, that it has proven to be relatively resilient but also in absolute terms compared to other asset classes like hospitality or retail.” 

He points out that looking at student numbers and international student traffic over the last 20 to 30 years there has always been a peak after a crisis. “We have seen that in the 90s, we have seen that in the in the early 2000s, we have seen it again after the financial crisis in 2010-2011 because, for obvious reasons, investment in education is always an investment into an individual’s future.”

“Geographically, particularly the countries we’re in, there has been strong influxes of students from Southern Europe, from countries which have been hit harder economically by these crises in the last cycles.”

Nonnengässer adds that many of these students are favouring Germany or the Netherlands for higher education because they believe that their job prospects are better afterwards. 

“Taking this into consideration, we strongly believe that once we arrive at the ‘new normal’ Germany and the Netherlands will see strong international growth in student populations.”

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