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Alternative Asset Class: APAC Investors Eye Europe’s Student Housing Market

10/10/2018

Written by Caroline Dellasega, Head of EMEA Capital Markets Desk, Asia Pacific & Paddy Allen, Head of Student Accommodation Investment, EMEA, Cushman & Wakefield.

Asian investors have been some of the most active in the Purpose Built Student Accommodation (PBSA) market in Europe for the past few years. Investors from Singapore including GIC, Mapletree, Far East Orchard, and Centurion have been notable in building out significant portfolios. More recently, we continue to see new entrants into the market, such as Singapore Press Holdings, attracted by the robust investment fundamentals across the student housing sector.

Alternative Asset Class

 Across global markets, we are seeing what were previously known as alternative asset classes moving into the mainstream as investors seek diversification and growth. PBSA, with its compelling supply-demand dynamics and defensive characteristics, makes an attractive proposition for institutional investors.

In terms of investment amount, from APAC sovereign wealth funds, to high net worth investors and to real estate developers, APAC investors have invested over £1bn into UK student accommodation in the last 3 years.

Investment Fundamentals

 According to Oxford University, the Global Tertiary Enrolment Ratio (share of student age population at university) increased from 14% to 32% in the 20 years to 2012 and shows no sign of slowing down, especially amongst developing countries. India, as an example, had 14 million students in higher education in 2007, 28 million in 2013, and is forecast to reach 119 million by 2025.

The rising demand for global Higher Education continues to attract institutional capital to invest in European student accommodation with the largest annual growth at 26% year-on-year, in term of overall volume, across the continent, according to the latest research from Cushman & Wakefield.

alternative-asset-class-apac-investors-eye-europes-student-housing-market

 

Evolving PBSA Investment Landscape in Europe

The European student accommodation investment landscape has continued to evolve in the past year as increasing global sources of capital allocate to the sector and across the risk spectrum. As a result, competition and activity have amplified across European real estate markets, with investors seeking student accommodation investment opportunities in both traditional and non-traditional locations.

Capital flows into student accommodation continue to be dominated by the UK market, especially in London. Excluding the UK, transaction volumes across selected mainland European markets increased in 2017, Spain for example saw over €600m of transactions, up from circa €100m the previous year.

Portfolio deals in mainland Europe will continue to be limited due to the lack of developed stock in the market, but it is likely 2018 will see increased development activity with institutional capital backing local development partners. Due to the evolving nature of the sector across Europe and increasing capital allocation, investors are becoming more creative in how they invest in building exposure. Forward funding, forward commitments, and strategic joint ventures are becoming ever more popular in a market where longer term investors are seeking to deploy more ‘develop to hold’ strategies.

Click here to download our in-depth report on student accommodation trends across key European markets.

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