Student housing sector set for further growth in 2016

Europe’s student housing sector is set for another record-breaking year in 2016 in terms of investment, following strong trading activity in 2015, experts agreed during a panel discussion held at Expo Real in October.

The session was hosted by Dutch investment manager Bouwfonds IM and organised by The Class of 2020, a platform for student housing providers in Europe.

‘What we are seeing now in continental Europe is only the beginning,’ said Felix Hillen, managing director of The Student Hotel, a hybrid European student housing and hotel brand based in Amsterdam. After years of warming to the asset class, investors have discovered it in a big way in recent months. During Expo Real, The Student Hotel announced a partnership with APG, the asset manager for the €356 bn Dutch civil service pension fund ABP, which will invest €100 mln in the company.

The capital injection will enable The Student Hotel to realise plans to invest more than €600 mln in its Dutch and European student accommodation portfolio in the coming three to five years. The news came a week before The Student Hotel announced the acquisition of a former public building in Florence which it plans to redevelop into a 390-room student residence by 2017. The Student Hotel currently operates 2,750 rooms in Amsterdam, Rotterdam, The Hague, Barcelona and Paris. It aims to reach 10,000 rooms by 2020 through a programme of similar acquisitions in Italy, Germany, France, Spain, the UK and Scandinavia.

‘2016 will certainly break records again for continental Europe,’ said Tom Wilmot, acquisitions and development manager at UK student housing developer Crosslane. ‘But what we’ve seen in the UK is so extraordinary, I don’t think we’ll see the same volume being traded again for 2016.’ Indeed, in the first six months of 2015, £3.8 bn was invested in the UK student housing market, mainly due to existing portfolios changing hands. Canada’s CPPIB, for example, entered the UK in March with the acquisition of the Liberty Living platform for £1.1 bn. Wilmot: ‘That’s something I don’t think we will see every year.’

CPPIB followed this maiden deal up in August with the acquisition of a 2,150-bed portfolio spread across five university cities for £330 mln. Figures from the Global Student Accommodation Group show that investment in the UK purpose-built student housing market reached £2.45 bn in 2014, up almost a quarter on 2013 levels. GSA expects investment for full-year 2015 to hit £5.5 bn.

Another record-breaking year for continental Europe
But for continental Europe at least, the panel said it expects another record-breaking year in 2016. Michiel Dubois, managing director of residential real estate at investment manager Bouwfonds, said: ‘The extraordinary thing is the speed of change in the European student housing market. Institutional capital has now has found its way into the sector, even though only a few years ago, there was no appetite for student housing.’ This also creates pressure to further develop the sector. ‘There are no benchmarks, no indices, but working together as a sector will help us create a more transparent market,’ said Wilmot.

2016 is also the year Rainer Nonnengässer will be opening the first two locations of MPC Capital’s new StayToo brand in Bonn and Nuremberg. ‘We believe that in many university cities across Germany there is room for new forms of micro-living,’ he said. According to figures from adviser Savills, the German student housing market recorded a transaction volume of over €200 mln in 2014, the highest level to date for the asset class.

Over the last five years, the student housing market in Germany has experienced a boom in the construction of privately financed and operated student apartments, which has in turn created the availability of increasing levels of investable stock.