Demand for alternative residential investments, mainly student housing and residential-for-rent, is clearly growing in Central & Eastern Europe with countries like Poland offering great opportunities for developers. More than 130 real estate professionals came together at the first-ever Alternative Investment Forum, organized by CEE event and intelligence hub Property Forum, in Warsaw.
Based on an audience poll conducted at the beginning of the conference, most participants expect alternative assets in 2020 to perform even better than they did in 2019. The vast majority of them finds student housing and PRS to be the most attractive asset classes.
In 2019, €66.5 billion was invested in residential assets on European markets which represents a 42% increase compared to 2015, Stuart Osborn (Knight Frank) explained in his opening speech. Three countries – Germany, the UK and France – are leading the way in alternatives, accounting for over 75% of the investment volume over the past three years. While in 2018, only 38% the total European transaction volume was spent by specialist investors, this figure is expected to reach 51% by 2027. The main drivers of this trend are strong supply-demand dynamic and the promise of a long-term stable income, in addition to demographic and economic changes.
Panellists of the conference discussed what makes residential investments attractive. Maximilian Mendel (JLL) explained that although residential investments such as student housing offer lesser returns than office investments, the achievable income is much more stable, not to mention the fact that the asset class’s performance is countercyclical. The only issue is that banks in Poland so far have not been open to financing such projects, which meant that developers had to turn to German and Austrian banks. This will probably change in the future, however, as growing investor demand and more operational experience will help developers present a stronger case to financiers.
Countries in the CEE region, especially Poland, offer great potential for developers of student accommodation and panellists expect several new players to enter the market in the coming years.
As usual, the fact that regulation is not changing as fast as the market does pose certain challenges for developers. Luckily, according to Sylwester Żydowicz MRICS (Taylor Wessing), as the market matures, regulators will adapt.
