Much has been written about Purpose-Built Student Housing (PBSH) in the past few years as globally, investors have cottoned-on to the compelling investment story that lies behind this growing asset class. Its mix of over-demand and under-supply, even as global student numbers look set to rise still further, has attracted billions of investment dollars, pounds and euros into new developments in many cities across the World.
Low interest rates and bond-yields alongside regular bouts of stock market volatility has meant that Student Housing has become the darling of the longer-term income investor as well as those keen to crystallise development profit as universities globally prepare for the 90-odd million new students expected to join the cohorts seeking higher education over the next decade.
What is perhaps not considered, though, are the opportunities for SRI investing – an acronym with several definitions but for our purposes, Sustainable, Responsible and Impact. In other words, investing in assets that are designed to be considerate towards the environment, society and the needs of communities in general, where energy-efficiency and environmental-kindliness is an important element within design, and where the act of investing can have a positively impactful effect upon users or the communities in which the investments are made.
That’s a very general definition and whilst readers may have different views on what constitutes an SRI investment, the broad principle we are looking at within this piece is that investors seek to increase the value of their capital but not at the expense of the environment or society in general and where some real, life-enhancing benefit can be provided to others.
JUST HOW CAN STUDENT HOUSING FALL INTO THIS DEFINITION
Clearly, not all Student Housing developments (we’ll call them PBSH from now on) will fall into the SRI definition – that’s not a criticism at all, just that SRI principles were not necessarily at the top of all investors’ wish lists when they chose to invest. Nothing wrong with that – many retirees for example, both present and future, will be delighted that their pensions are being funded by such viable and consistently-profitable real estate investments that will provide reliable income for years to come.
However, where there is a growing movement within investor circles where certain criteria need to be satisfied – there is a new opportunity for these standards to be incorporated into asset classes which can also reward investors with consistent and attractive returns.
PBSH is generally used by younger people as they take their first steps into higher education, often these days in a host city or country other than their own. Immediately, this conjures up images of nervous youngsters finding their way around a strange city, in a country they may have never visited before, seeking accommodation that is always in short supply.
Providing a ready-supply of modern, secure housing with additional levels of facilities aimed at students from a broader section of the global community could nicely match the criteria that SRI investing tends to have when strategies are employed.
SUPPORT FOR STUDENTS CAN ENCOURAGE GREATER MOBILITY
PBSH that is run with these young people in mind, can be a support for them as they find their feet in the first few months, and also as they learn to cope with heavy study workloads, being away from their families, and maybe cultural differences that add additional pressures. This is an area most PBSH developments will already allow for with well-run management services ensuring students don’t feel isolated or overwhelmed.
Mental health is a huge concern in these environments where students may need peer support and pastoral care when things can get on top of them, either with their studies, relationships, financial matters or simply feeling isolated from loved ones. Increasingly, operators are aware of these issues and will work with mental health charities and the colleges themselves to provide valuable support when needed.
Within an SRI-friendly environment, these elements could be improved even further by adding new layers of support and encouragement, particularly to students from less-well-off countries with perhaps limited resources.
AFFORDABILITY – A PERENNIAL CONCERN
Much of the fuel that has energised the PBSH sector in mature markets, has come from the rising numbers of wealthy students (domestic and foreign) that have entered the higher education (HE) arena at a time when global student mobility is rising to new heights.
UNESCO has projected that between 90mn and 100mn new students will be entering HE in the next ten years or so – many of them will study abroad. From China, India, the Middle and Far East, these students are choosing premium quality residences close to the World’s leading universities and colleges. Developers and operators alike are gearing up for this demand and at price levels that are suited to the needs, aspirations and budgets of well-off students whose families have the resources to fund comfort and convenience.
There is nothing wrong with that at all – that is a valid and successful formula. As an alternative, though, can SRI be effective on the other side of the coin? Can it assist in providing affordable housing for the less-well-off and still create value for investors?
This may be another way in which SRI-funded PBSH can help a wholly separate stream of younger people who are seeking to gain a good education and live securely and conveniently close-by to their place of study, and social and entertainment needs.
At more moderate rents yet with good quality finishes and amenities, utilities included and with caring and thoughtful support services on-hand, this section of our global society could be ensured that high standards of education, foreign travel and positive cultural exchange experiences, will not elude them.
WORKING TOGETHER TO HELP MORE STUDENTS ACHIEVE THEIR GOALS
SRI investors who collaborate with skilled and experienced developers and operators could create a dynamic new movement within the higher education sector, enabling students from more countries and more economic strata than ever before to benefit from the World’s universities.
Many countries, especially in the emerging economies of Europe by way of example, have on offer a good education but at living and tuition costs that are more within the means of more students. This could be a whole new way forward for SRI investors to stimulate and support the growing higher education system and the students seeking to benefit from it.
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