As institutional investors pour more and more money in student housing, attracted by higher yields and a steady revenue stream, the sector will see a wave of consolidation in the months ahead, delegates heard at Real Asset Media’s Student Housing & Micro Living Investment Briefing, which took place at MIPIM.
‘Consolidation in the student housing sector is at the very beginning,’ said Samuel Vetrak, CEO, Bonard, in his keynote presentation. ‘This year and in 2020 we can expect more portfolio deals and acquisitions, especially in conjunction with institutional money coming in. There will be a lot more liquidity in the market’.
The student housing sector now has 600 companies globally and accounts for transactions worth $10 bn a year, 2% of the total. In the next 2.5 years, 350 projects will be coming to market, taking the volume up to $15 bn.
The consolidation trend will reorganise the market into fewer bigger and branded players. At present the sector is fast-growing but still very fragmented.
The definition of a portfolio is at least 500 beds and more than two buildings. According to Bonard research, in Europe including the UK there are 107 portfolios which meet the criteria but most of them are small: 44 go up to 1,500 beds, 38 up reach 5,000 beds and only 25 of them are larger than 5,000 beds.
According to a recent CBRE survey, 52% of investors plan to put money into alternative asset classes and out of all of these student housing is by far the most popular choice in Europe.
‘Investors see it as a revenue-delivering asset class, even at the end of the cycle, with occupancy rates between 90 and 100% and totally recession-proof,’ Vetrak said. ‘Yields are higher than in mainstream asset classes by between 100 and 250 bps.’
Investors who were focused on the UK are now looking to other countries in Europe, said Vetrak: ‘After the boom in the UK, Germany and the Netherlands, the most activity we see now is in Spain, Italy and Central and Eastern Europe, the most under-supplied countries that deliver the best returns’.
Supply is increasing steadily, but not enough to meet growing demand. Berlin is a typical case study: the student population is forecast to be 200,000 in 2020 and the pipeline is 20,000 beds. ‘This increases the total provision rate projection from 9.5% to 10%, which is really not that much’, he said.
European universities are being increasingly proactive, organising roadshows and marketing trips to persuade international students to choose them. In less than 10 years, they have increased the number of courses taught in English from 55 to 5,000.
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