PropertyTV: Student beds sector works to graduate as global asset class

The student accommodation sector in Continental Europe is still in its infancy, but work is underway to transform it into one of the alternative real estate asset classes that are increasingly attractive to international investors.

The UK market is the benchmark for privately owned, purpose-built student accommodation. Like all markets, though, it grew from humble beginnings, and the nascent Continental European sector - subject of a PropertyEU briefing at MIPIM 2014 - is similar to the situation in the UK over 20 years ago, according to Philip Hillman, lead director, student housing & higher education at JLL.

'The student housing market in the UK has really evolved since the early 1990s. At that time you only really had purpose-build accommodation owned by the universities, and the shared houses as seen on "the Young Ones" television comedy show,' Hillman recalled. 'The idea of student housing as a purpose-built property sector was almost non-existent.'

Hillman became involved on the advisory side in the UK sector in 1992-3 just as the first student accommodation projects were being undertaken by private sector players. 'There was really no transactional evidence at all. Virtually every block was retained by the people who built it and they became developer-operators.'

TRANSACTIONAL EVIDENCE
Given the lack of trading it could hardly be described as a market. 'Until about 2005 there were no transactions and I spent 10 years trying to value student accommodation relative to other sectors rather than on any real evidence. In a way that's where we are now at in mainland Europe,' Hillman told PropertyEU.

While there is very little trading of student accommodation in Continental Europe, there is tremendous demand. 'There is a huge mismatch between demand for quality accommodation and supply. So, we are seeing some developers coming into the market looking at the opportunities in Europe, and wanting to build critical mass to attract investors.'

These investors want to acquire 1,000s of beds rather than small, one-off developments. 'It is early days but I think in Europe we are going to see an accelerated growth in the market following on from similar experiences in the UK, the US and in indeed in other parts of the world,' Hillman said.

It is also early days for the student beds industry in Australia. But, Hillman said, this is changing: 'We are seeing that market really take off now. There are lots of transactions and we are working on a project in Sydney. These are the types of substantial transactions that are really showing a new global asset class is emerging in one of these alternative sectors that are very attractive to investors.'

See the May edition of PropertyEU Magazine for a special report on the student accommodation sector in Continental Europe.