In last 10 years, student housing has evolved into a highly appealing asset class, now ranked fourth for development and investment by over 200 investment managers. With student numbers growing and revenues delivering as promised, even during economic downturns, it is regarded as a crisis-resilient asset class, good for investment in 2019, according to a new study released by student housing research specialist StudentMarketing.
The student housing asset class now counts over 500 investors, managers, developers and operators in Europe. Annual transactions reached almost €10 billion in 2018, yields continue to outperform mainstream asset classes by a great margin (ca. 100 to 250 bsp).
Now, student housing represents a well-established, trusted, and documented asset class with considerable awareness, investment appetite, and liquidity. Though, a still relatively nascent sector, only at the beginning of consolidation and maturing (107 portfolios, 76% smaller than €1 billion), with many opportunities for high returns.
Moreover, student demand heavily outstrips student housing supply, on average there are beds for only 15% of the students in continental Europe. Demand is strong and growing, most student houses record close-to 100% occupancies.
Among the growing number of international students, most demand is for modern competitive private PBSA with rich communal areas and amenities, enabling community life and opportunities. Students are willing to pay from €473 (Budapest) to €1,300 (Milan) per month for a private single studio, on average €610 across Europe.
Governments, cities and universities stimulate further demand from overseas, in order to have more international paying students as well as future talent and lifetime taxpayers. More relaxed policies, work rights and €2-5 million pa marketing budgets are in place to welcome more students in the future.
Over 350 new private PBSA projects with 105,000 beds are in pipeline to come to the market in the next two years (€15 billion value). But still not enough to meet the demand – the number of students is increasing more rapidly.
Moreover, the number of students does not decrease in economic downturns, university studies are a matter of age, long-term planning and non-deferrable commitment, as the numbers from last 20 years show.
Recently, several investment managers plan to allocate more capital to this asset class, as part of their strategy to be present in income-delivering sectors at the end of the market cycle.
