Investors see student housing as a resilient sector

Investors see student housing as a resilient sector
Rainer Nonnengässer, CEO, International Campus, being interviewed after the conference at ExpoReal.

“Institutional investors are sure they will get their long-term returns,” said Samuel Vetrak, Chief Executive Officer, Bonard. “There is more confidence in student housing than in other asset classes like retail or offices and no desire to divest”.

In Asia, the first to experience and get over the epidemic, “student housing has gone from bottom of the list to 3rd most in-demand asset class by investors with capital to allocate”. The same trend is likely to be seen in Europe next year. “We anticipate that there will be more players in 2021 and competition for student housing assets will be intensified,” Vetrak commented.

The expectation is that the negative impact the coronavirus is having on the sector will be short-lived. Some operators are experiencing cancellations, deals and transactions have paused and opportunistic investors are on the prowl for bargains.

“Unlike the hotel sector, student housing is experiencing some difficulties but no collapse”. Another sign of optimism is that “developers are not concerned and continue to work whenever possible”. There is a pipeline of 725 new projects being developed in Europe, some of which will be completed this year.

Besides that, rents have remained stable and they are not expected to drop, added Vetrak.

There will be more activity and consolidation ahead in the sector, experts agreed.

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 months 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: ‘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. There will be more focus on markets where they already are to build critical mass and achieve potential cost-savings, which are important as operational costs are likely to increase.

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