Review of 2018 and Outlook 2019

Now the Christmas tree and fairy lights have been put away for another year and 2019 is firmly upon us, it’s perhaps a good time to reflect upon 2018 while looking ahead to what’s coming up.   We are offering our outlook for 2019 and beyond, in our “ best dating spots in metro manila Studiview 2019”.

 

eurochallenge rencontre femme asiatique What happened in 2018 and what signals can we see for the future?

 

Another bumper year for investors, sellers and purchasers with UK transactional volumes alone likely to top ca £5.25billion. (Savills 1.)  Focus upon the turnover across Continental Europe and there we’ll see a 2018 total investment tally around EUR9.5billion (Student Marketing 2.) Both numbers indicate positivity for the sector – the UK still buoyant and Europe surging ahead as demand increases.

http://adamsisco.com/?mikity=rencontre-yopougon&42b=16 In our view, and this is certainly reflected in the first major UK deal of 2019 where the investment appetite was described as “ferocious”, the buoyancy of the UK market despite the obvious uncertainty created by the rather stumbling Brexit negotiations, is testament to the overall resilience of its Purpose Built Housing (PBSH) sector.

Arlington Advisors’ joint venture with Equitix that involved a portfolio of a little under 2,500 beds with a price tag in order of £280 million across multiple cities demonstrates the UK’s enduring appeal as a PBSH market.

Growing demand and a spreading of buying interest into new countries in Europe itself also shows a broadening appeal as investors seek higher yields and new investing opportunities.

 

Added to this, Scape USA is the latest venture by a UK-origin student housing provider into the United States.  To some, this may appear counter-intuitive as surely the ultra-mature US student market has little to offer an outsider?  Scape’s management would firmly disagree and their approach to enter the US urban infill markets and provide accommodation where there is still demand, may raise some eyebrows.

 

rencontres cuisine et santé Always room for more

 

The point is, there is always room for more student housing provided you scope out the locations, demographics and economics carefully. Scape believe that’s true in the US and Arlington/Equitix clearly believe the same in the UK.   The fierce competition they fought off for the high-quality Stellar Portfolio obviously also agree.  At Studivest, we also believe the same is true in new European markets too, but more about that later.

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It never hurts to remind ourselves what is behind the PBSH success story:

 

Global demand for Higher Education shows continuing and increasing demand, irrespective of the economic cycle. Some 276million students are projected worldwide by 20304.

 

Greater student mobility is here to stay, students studying abroad have risen five-fold since 1975 with UNESCO suggesting there are in excess of 5 million international students worldwide. 4

 

Investors seeking long-term rising, stable and sustainable income have few other reliable alternatives. While operating costs are a concern, PBSH’s defensive investment options are appealing.

 

Student Housing is a stable and sustainable investment asset that avoids the lurching roller coaster ride that is the volatility seen in equity and commodity markets in recent years.

 

Few, if any, real estate sectors have these enduring fundamentals and investors are seeing that reality in both mature and immature markets alike.

 

additional resources The New Frontiers

 

The hunt for yield is on.  While there is clearly plenty of undersupply of beds in the UK and an oversupply of willing investors, yields will still be attractive although compressed, and properties bought at a premium will inevitably see lower returns.  Countering that, new development may get more expensive, certainly in London where Planning rules and building costs are a constant headache.  This would probably lead to rising values for existing built stock, and future returns being built-in.

 

Increasing numbers of investors though are yield-hungry and are also prepared to take a measured yet higher risk by investing in new European markets.  Some locations in Spain, Germany and Italy 5 are still attracting strong and growing investor attention.  Moving on from the larger university cities to the provinces seems to be the popular approach here and we anticipate considerable investment Euros to flow this way during 2019.

 

It will come as no surprise to anyone that Studivest is a strong proponent of Central and Eastern Europe – we have been talking about the region now for the past twelve months.  Rising investment volumes are now following this lead and moving into the region with Poland, Hungary and Czech Republic already hot prospects.

 

Investors there are seeing lower land prices, building and labour costs while growing property values will follow in the next twenty-four to thirty-six months.  Buy and build now and sell or hold at considerably higher values as the institutional buying fever continues to spread eastwards.  There is little institutional quality stock currently available but that is changing fast and liquidity will soon follow.

 

http://www.hotdogsuitlaatservice.nl/zybnapasta/4522 A sense of community

 

There is also the rising interest in Micro-living / Co-Living to be considered.  As the cost of city centre housing continues to rise, and the desire for the urban “buzz” gets stronger, many city dwellers are  turning to the modern equivalent of the “house share”.

 

Living in a new city (or maybe even country), can be a difficult experience and accessing a tailor-made community can combat loneliness.  This is true for students especially, but can also apply to more mature individuals.

 

For some housing providers this is an opportunity to blend their student offerings with a wider proposition.  Mature or post-graduate students, younger professionals and others who prefer a more “nomadic” lifestyle can rent a modest size room but share high-quality, well-designed amenities such as kitchens, cinema rooms, gyms and social areas achieving a true sense of community yet maintaining their own private space.

 

This concept is not new but is gaining traction and, generally in many locations a one-size-fits-all approach can work.  The Student Hotel, which has plans for forty-one properties across Europe by 2021, is a great example of a provider smudging the lines between the various demographics that make up their audience.  They are also looking to do the same to the lines that separate living and working.

 

Investors may like to consider bringing these additional demographics into their planning – the risk profiles and resident needs may vary between them, but diversifying into varied leasing arrangements and the possibility of agreements for hundreds of rooms at a time for a major employer, are examples of a broader spread of tenant that may be worth looking at.

 

https://restaurantmartinwishart.co.uk/atom/5687 Affordability

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The cost of living in their optimum location needs to be assessed by any person, whatever their education or work status.  Housing costs are rising in most countries these days (when have they ever fallen?) but high-quality can come with a price.  This basic logic will not be lost on anyone hunting for a great flat, close to work or college, and much press has been dedicated to the rising costs involved.

 

Yes, living in a city-centre location is rarely a cheap option but sharing facilities and amenities can reduce costs considerably.  What is interesting though, is that privately-funded PBSH providers and investors often receive media criticism for high and unaffordable rents.  The “average bed space”, as defined by Cushman & Wakefield in their 2018/19 UK Student Accommodation Report, does indeed cost 7.9% more when privately-provided. This rises to 21.6% more when viewed annually but both figures, in reality, do not reflect the true picture when room type is taken into account.  The private sector’s preponderance to offer greater numbers of studios does inflate the average.

 

Comparing an average en-suite bed space offers a different result with private, weekly rents , at 6.28% lower than a university-owned property.  Room and amenity quality are also generally higher in privately-funded properties but, due to longer leases, annual costs are lower in university-provided accommodation.

 

However, the private sector can robustly defend its record of providing conveniently-located, well-designed, secure and well-connected rooms to the growing body of students, both domestic and international that previously had little choice and even less opportunity before the sector’s dramatic growth over the past twenty-five years or so.  What’s more, by creating purpose-built student rooms, traditional homes can be returned to the general stock thereby helping to ease family housing shortages.

 

Housing affordability does remain an issue, as it does for families and many other people within our society – however, within certain parts of Europe, more affordable options are becoming available as the business model swings across the Continent.

 

rmc rencontre Outlook 2019 – in summary

 

Whether your aims are high quality, existing portfolios to provide “instant” scale, or new development in a frontier growth market, you are still very much spoiled for choice.  The UK as Europe’s premier Student Housing market has tried-and-tested development and operating markets while the Continent has a wealth of opportunities across several countries where their governments are catching on to the benefits of growing their own “Knowledge Economy”.

 

As a footnote, while the “UK Model” is very exportable and generally does work well across Europe, never forget that each country has different approaches to planning and the legal aspects of property ownership.  Every country needs to be assessed individually and the financial and corporate structures you use should be carefully planned.

 

Affordability is a concern for many, although foreign students are often financially more able to bear the costs of high-quality housing, and are targeted accordingly.  Growing student mobility will ensure there is a ready supply that will fit this bill.  Many parts of Europe, particularly in Central and Eastern countries are very much targeting those international (as well as domestic) students for whom deep pockets are not available.

 

Consider the additional opportunities that lie in Micro or Co-Living markets.  These can blend with students in the right location, and where city-living has become so expensive, could find a ready market amongst those who are keen to live at the heart of the urban action.

 

Great opportunities call for careful assessment

 

As great as these opportunities are, they still need careful research and assessment.  Studivest knows these markets and has partnerships with developers, financers, data providers, surveyors, operators and investors.  We can use these relationships to match your needs whether you are an investor or a developer or existing property owner.

 

Do get in touch and we will be pleased to discuss your options and help you to capitalise upon this unique and enduring asset class.

 

Click here to see our original report: Studiview 2019

 

1                     Savills – http://www.studivest.news/033c6

2                     Student Marketing – www.student-market.com

3                     Arlington/Equitix buys £280m of student housing – www.studivest.news/arlind485f

4                     CBRE Global Student Housing 2018 – p.9

5                     The Class of 2020 looks at Italy – (http://www.studivest.news/thecle6ca8)