Briefing: Operational efficiency the key to a successful strategy

Wise investors should learn from Germany’s example, get the design of the building and the product right and then prioritise operational efficiency over short-term rental gain.

Student housing and micro-living may be an easy choice for investors who see the supply/demand imbalance, but they are complex sectors to understand and operate well, panellists agreed at Investment Briefings’ European Student Housing & Micro Living panel, which was held in London last week.

The biggest supertrend in the sector is that ‘product matters’, said Samuel Vetrak, CEO of Bonard, formerly known as StudentMarketing: ‘There is an increased demand for amenities and communal areas are very important to ensure full occupancy.’

Panel discussion, Student Housing & Micro Living Investment Briefing, February 2019, London

To be attractive to different kinds of students, the accommodation must be in a convenient and outstanding location, it must have a state of the art building and inside a gym, a games room, bike storage, a cafeteria, laundry room, TV room and other shared facilities that create a sense of community.

If these criteria are not met, international students will stay away, even in places where there is a lot of demand for accommodation. One example is Vienna, said Vetrak: ‘There is a big supply/demand imbalance in the Austrian capital, yet some student housing complexes are not fully occupied because they do not satisfy the criteria.’

Micro Living is dealing with the same issues, said Christian Scheuerl, Managing Director, MPC Microliving Development: ‘Sometimes it is difficult to get small developers to get to grips with what is needed for the product. It must be a home for the tenants, but it must also be investor-ready and allow us to cut down on operating costs.’ 

Wise investors should learn from Germany’s example, get the design of the building and the product right and then prioritise operational efficiency over short-term rental gain, said Andrew Allen, Global Head of Investment Research Real Estate, Aberdeen Standard Investments.

‘In the UK the typical landlord has been chasing rental growth very hard, but what we have learnt from Germany is operational efficiency, which is demonstrably better,’ he said. ‘If you keep your tenants happy they will stay longer, which means less downtime, less capex, less agency and management costs. These efficiency gains maybe haven’t been fully understood by the Brits yet.’ 

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