There is a new wave of capital coming into student accommodation as investors focus on the long-term fundamentals of the sector, experts agreed at the Student Housing, Micro-living and co-living briefing which was held online at REALX.Global, the virtual trade fair organised by Real Asset Media.
‘I see more investment coming into the sector,’ said Brian Welsh, CEO, Nido Student. ‘There is a lot of life left in student housing, and from September 2021 it will be back to normal’.
Already this year there were 25 PBSA transactions between April and August, at the height of the pandemic, according to Bonard data. There are 100,000 beds coming to the market by 2022 and none of the projects in the strong pipeline has been delayed.
‘Investors remain confident and there is also more financing available,’ said Samuel Vetrak, CEO, Bonard. ‘There have been no divestments and we are seeing a new wave of opportunistic investors coming to Europe, especially from the US’.
Reality vs perception
Investors who know the asset class believe in its positive prospects, while some who don’t may be deterred by the uncertainty regarding the pandemic.
‘There is some concern among investment houses that Covid-19 has had an impact, but that perception is wrong,’ said Douglas Edwards, Head of Group Equity Raising & Client Services, Corestate Capital Investors. ‘If you look at the fundamentals, the reality is better than the perception’.
In almost all European countries, with the exception of the UK, demand far outstrips supply.
‘People who have had exposure to the asset class already are the most confident,’ said Vetrak. ‘Some newcomers are cautious because there is a negative perception which is not justified by the reality on the ground’.
This year’s performance is ‘in line with last year, which is remarkable considering what has been happening’, said Welsh. ‘Reality has exceeded our expectations’.
Opportunities in many countries
In future, he said, ‘the success of the UK will be replicated in other European countries’.
Many key markets offer opportunities, like Italy, Spain, Poland, Portugal, Ireland, Denmark and the Scandinavian countries, although ‘there is an element of planning and development risk’, said Edwards, but the potential rewards are huge.
Looking at the short-term, the other positive for the sector is that all over Europe students want to return to their University and attend lessons in person as they see remote learning as a poor alternative to normal lessons.
‘Students study online because they have to, not because they want to,’ said Vetrak. ‘In some cities, 50% of international students arrived at their PBSA even if teaching was online only, because they wanted the experience, the social life and the feeling of being there, even if it means having to quarantine’.
Most universities, however, have chosen a blended or hybrid model involving a mix of virtual and in person teaching. Experiences vary in every country and every city, but ‘most students want to go back, that’s a clear trend, and Uni enrolments have gone up,’ said Welsh. ‘The problem has been travel restrictions. Ireland, for example, has raised more barriers to international students than the UK’.
The UK, Italy, Germany, France and Spain have allowed foreign students to return to the country and to their accommodation.
Back to normal in 2021
There has been an increase in domestic students renting rooms, as many foreign students have had problems travelling. But overall Bonard calculates that PBSA occupancy across Europe is now above 80% and rental levels are still competitive. ‘No discounts have been given,’ said Vetrak. ‘We are positively surprised by how resilient the sector has been, especially compared to other asset classes’.
PBSA operators have made their positive contribution, experts agreed: they have been very proactive and have worked very hard to focus on wellbeing, closing public areas down, establishing clear facial covering, social distancing and sanitation rules, enforcing discipline and creating a safe environment for students.
The expectation is that in 2021 normality will return. ‘The sector will be more dependent on domestic students for the foreseeable future as international mobility is impaired, but next year we expect foreign students, including from Asia, to be back,’ said Vetrak. ‘It will be a good year’.
The article was originally published on Real Asset Investment Briefing (September 2020). You can read it online at the following link.
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