16 Oct 2019 | MUNICH, Germany – In the recent study presented last week at Expo Real, BONARD, an independent research provider for alternative asset classes, looked into the latest trends and developments in global student housing. “Out of 19 alternative asset classes, student housing is number 1 in terms of volume and, so far, has attracted more than 700 investors globally. It is mature, transparent and sizeable, while still offering the benefits of an alternative real estate asset class,” said Samuel Vetrak, CEO of BONARD, to 120 delegates in the packed audience at Expo Real 2019.
Demand strong, capital pouring in, yet opportunities are limited
“International student demand remains strong, consistent and growing even during the economic downturn, making student housing a counter-cyclical asset class,” added Vetrak. Bonard identified 7 super-sized cities with 30,000 or more international students – who are the main target of private PBSA product – namely London, Paris, Melbourne, Sydney, Vienna, Madrid and Berlin, followed by 19 big cities with 15,000 to 30,000 students and 60 mid-sized cities with 5,000 to 15,000 students. “Super-sized and big cities are targeted by players interested in deploying significant capital and aiming to acquire ambitious housing volume. The majority of cities are mid-sized, though, and these are usually part of most strategies across the industry,” Vetrak explains. Opportunistic investors that are more focused on returns than volume, as BONARD adds, are looking into niche cities, which might be Tier 2 by total population but Tier 1 by student population.
Europe and Australia among hotspots; 592 projects in the pipeline
“The number of international students is no longer growing in the US, while an increase in student numbers is expected in the UK due to the cheaper pound and new regulations around working rights,” says Vetrak. In terms of saturation and provision rates, the UK has a total bed-to-student ratio of over 25% (when comparing int’l students vs private beds only, it is up to 50% in some UK cities), whereas in continental Europe it stands at just 13% (when comparing int’l students vs private beds only, it is up to just 5% in some continental Europe cities). “For Europe to have the same provision rate as the UK right now, it would need an additional 1.1 million beds.”
BONARD data shows that there are currently more than 450,000 private beds in the UK and EU, worth 44 bn EUR. “Our analysts have monitored 592 projects that are coming onto the market in the next 2.5 years, either under construction or which have been granted student housing permits,” added Vetrak. The pipeline represents 151,000 private beds, or 17 bn EUR, with the UK, the Netherlands, Germany, Iberia and Italy among the leaders and the CEE, along with France, increasingly on investors’ radar. Australia is among the hot spots as well, with the government heavily supporting the education industry.
Primary data confirms trends in students’ living preferences and investors’ appetite
The research firm also conducts regular surveys across the globe, asking up to 10,000 students per city about their living preferences. BONARD’s primary data shows that, above all, students prefer to have amenities in student residences, especially a laundry room, study room, communal kitchen and gym. The company has also mapped out 107 existing portfolios and advise that only 25 of these consist of more than 5,000 beds; hence, the student housing market is fully ready and open for transactions and acquisitions.
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