Student housing is rapidly maturing as an asset class in Europe as investors enter the market and students’ demands become more sophisticated, a PropertyEU investment briefing at Provada in Amsterdam has heard.
Whereas in the past student accommodation was similar to social housing, with basic, often unfurnished units comprising a bedroom and shared kitchen and bathroom facilities, today’s users expect a far greater range of services. ‘What happened in the hotel industry in the last few years is also happening in the student housing industry,’ said Wouter Onclin, foundation manager of The Class of 2020. 'It's not just a box room, a bed and a shower.'
The Class of 2020 is a platform founded five years ago to give players in the nascent student housing sector the chance to share ideas and compare their experiences. It currently has around 50 partners across Europe responsible for a total of 350,000 beds.
Onclin said that Europe was still far behind the US in terms of investment volumes, with the exception of the UK, where an established student accommodation sector has grown up. 'There's a lot of interest, everybody has money and they all want to invest, but the product they want to buy isn’t there yet,' he said.
US MARKET
In the US, investors see the student accommodation sector as a solid investment with a reliable occupancy rate, said Robert Bryson, chairman and co-founder of Blue Vista Capital Management, one of the biggest players in the American market which owns and manages around 50,000 beds.
Bryson said student housing had the added attraction of being relatively downturn-proof. 'More people go to college during a downturn and they stay in college longer, so the demographic trends are quite favourable,' he said.
America also has an established tradition of teenagers going away to college, Bryson pointed out, in contrast to the European practice where students are more likely to study in their own town. Universities tend to accommodate students on campus for the first year before turning them over to the private accommodation sector, creating opportunities for student housing developers.
'That's typically the void that student housing operators are trying to fill with newer, nicer housing,' said Bryson. ‘What's being developed in the United States is Four Seasons Hotels for kids: swim-up bars and management packages that rival most five-star hotels.
'People accuse us of spoiling kids, but they come to us spoiled. They've grown up not sharing bathrooms or bedrooms and so we’re just trying to meet the market demand.'
CHANGE IS COMING
'One demographic trend that is set to change the student housing market in Europe is the rise in the number of international students,' Onclin said. The total number of students worldwide is projected to double over the next decade, in Europe the number of domestic students will peak somewhere between 2020 and 2025, but with an anticipated growth in the proportion of international students, student housing demand seems to still be growing.'
'The numbers are still fundamentally out of balance – in many places there's just not enough student housing. That's a huge opportunity there just in terms of numbers, so we’re going to continue to see growth,' Onclin said.
'The number of students entering higher education is going to double in the next 10 years and it's mostly students in developing countries – Africa, South America, Asia. Those are also the sources of our international students and those are people who need housing: they can't just live with their aunt and uncle in a spare bedroom.'
Dirk Bakker, partner and director of hotels at Colliers International, said there were clear parallels with the developments in the hotel industry. 'The trend is that you’re getting a lot of different kind of travellers coming in. The Chinese consumer is a totally different animal from an American consumer or a European consumer. A German traveller chooses a hotel on the quality of the bed, whereas a French one chooses his hotel on the quality of the breakfast.'
Onclin agreed that student accommodation providers needed to be more responsive to the varied needs and tastes of their customers. 'We've always seen students as 'the student' and that's not true. There are so many different types of students and they have different budgets, different ideas and different expectations. The market is finally segmenting itself to accommodate that.'
