The Class of 2020 and ULI Netherlands joined forces at the ULI conference in Paris on February 5. The first Student Housing Investment Breakfast was hosted and moderated by ULI Netherlands chairman Rudy Stroink and included investors and operators from across Europe as well as representatives from the Amsterdam investment office.
All signs confirm that the market is dynamic: new projects are popping up throughout Europe, but the lack of market data and the patchwork of regulations still makes entering the markets in Europe a challenge.
Strong market fundamentals
â€¨Attendants shared their experience in investing in, developing and operating student housing in the UK, Germany, France and The Netherlands. The market fundamentals are strong:
â–ª An undersupplied market that is not able to keep up with growing demand;
â–ª Growing student numbers, especially students coming from abroad who rely exclusively on purpose-built student housing;
â–ª Increasing wealth among international students whose high expectations are not met in traditional student residences;
â–ª Changing education cultures, where accommodation is increasingly part of the whole experience.
New projects announced
â€¨These strong fundamentals were illustrated by the City of Amsterdam which is seeing increased interest from international investors. Bouwfonds, MPC Capital, Alternative Development, and The Student Hotel all expect to announce new projects in the next few months, specifically in the German, French and Dutch markets. Alternative Development shared its experiences developing and operating in the London market, which seems to stand out as the most sophisticated in Europe.
Despite all this good news there are still obstacles in different European markets. Especially when it comes to securing funding and developing locations:
â€¨Whether it is equity or debt funding, investors need reliable market data in order to make their decisions. In the UK the market has matured: comparable data sets are available and exit strategies in place, securing investors’ trust. In continental Europe the market has yet to prove itself. There is a real need for a European benchmark for Student Housing. The Class of 2020 is working with IPD to have one in place by the end of the year.
Regulatory patchwork limits capital flow
â€¨Europe is a patchwork of different rent, building and tax regulations. In Hamburg a hotel development has stricter building codes than a residential development, while it is the other way around in Amsterdam. In Sweden the minimum size of a unit is 20 m2′s, while developers wish to build smaller units with more common space. In France, investing in individual units is attractive due to a fiscal tax deduction scheme. In many cases the local government has no experience accommodating private student housing developers.
All the different regulations limit the flow of capital into the markets and hinder innovative business models in markets that need them. It is difficult for developers to create an international portfolio of projects, as each local market requires customization and attention. Because of these specific local factors, a European business model is difficult to establish. The underlying investors have become European, but regulations are local.
Build a professional network â€¨Each student housing provider in Europe is pioneering in its own market and inventing the wheel. Sharing best practices and building networks will be essential for the growth and the professionalization of the market as a whole. In this stage of the market it is more important to be smart as a sector than it is to out-smart your competitors.
The panel also discussed segmentation in the market. Upscale concepts are attractive because of high margins and yields, but in many markets the greatest need is for housing schemes with moderate rents and higher volumes.
â–ª Alternative Development
â–ª APG Asset Management
â–ª Bouwfonds Investment Management
â–ª City of Amsterdam Investment Office
â–ª MPC Capital
â–ª Student Marketing
â–ª The Class of 2020
â–ª The Student Hotel
â–ª ULI Netherlands