Investors anticipate future demand in times of economic downturn.
In part as a result of rising rents and persistent shortages, the market for student housing continues to be interesting for investors even during the pandemic. This market has proven to be very stable over the last year, particularly in terms of the continued investor interest, which has led to a further compression of yields, narrowing the gap between student housing and the regular housing markets.
Some of the striking deals of the last year have included the purchase of ‘t Bassin in Maastricht by Catella and the more recent purchases of Prisma Tower in Groningen by XIOR and Rock Living in Utrecht by Greystar. Catella purchased the property from seller Mulleners real estate. XIOR and Greystar purchased Prisma Tower and Rock Living respectively from developer Round Hill/KKR. These investments were made at historically low initial yields. This is empirical proof of the fact that the investment market for student housing is closing in on the regular housing market.
Differences in local investment markets.
A prime example of the fact that more foreign investors are entering this market was the recent investment by a foreign investor in Groningen. However, this is not the case all over the country. One example of a city where there are relatively few investments from foreign investors despite rising shortages and rents, is Leiden. The figure below shows the extent to which this local market is still being dominated by housing corporations.
Generally speaking, interest in housing products has grown considerably. In the first few years after the last crisis, investments in homes amounted to just under a quarter of the total capital invested in real estate in the Netherlands. This share has gone up to almost one third. Partially as a result of product ‘blurring’, the student market is benefiting from this interest, with declining prime yields as a result.
The increasing growth is only partially visible in the investment volumes, which is the result of the fact that the market remains modest in size and, in some years, only a limited amount of product becomes available on the market. In addition, many developments are held in portfolios by investor developers after completion and they are not or only partially included in the total investment volumes.
Increased interest is also demonstrated by the number of investors who have launched funds in recent years for the purpose of (potentially) purchasing student housing projects. These types of funds are often not only aimed at student housing but also at affordable housing in the bigger cities. The blurring effect is visible here as well. Investors who have launched so-called micro-living funds, include Aberdeen, Union and Commerz. The number of cities these parties are investing in appears to be getting more diverse. Which areas are currently interesting for investors?