The future of Student Housing & PBSA according to 4 industry reports

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In early 2020, the resilience of the student housing and PBSA sector was put to question: if people are not allowed to travel, how are students supposed to fill in the rooms? Will online learning make people postpone their university experience? The pandemic has casted a shadow of uncertainty in even the most stable of industries and made bespoke coherent and timely data more relevant than ever before in supporting decision making.

By Q1 of 2021, real estate consultants and property advisors released multiple qualified reports packed with insights and market intelligence providing an overview of the real estate scenario and, more specifically, of the student housing sector. To discover what the future holds for student housing, we have selected four key industry reports and summarised the most relevant findings for investors, developers and operators.

Our Selection of must read Student Housing Industry Reports

1. 2021 EMEA Real Estate Market Outlook - CBRE

The most recent CBRE report gives a broad overview on the real estate industry through nine chapters: economy, retails, beds, investment, logistics, data centres, offices, hotels and operational real estate. When it comes to student housing and real estate, what is most important to mention in regards to the European economy is that after a 7.3% fall in GDP in 2020 alone, a 4.6% recovery is expected in 2021. Furthermore, monetary policy in the EU should remain ultra-accommodative for at least the following three semesters, reassuring investors and developers.

According to the CBRE market outlook, student accommodation in 2021 will continue to endure cost and operational challenges. It is expected that operators will reduce expansion plans and focus on their current assets. In the short term this might reduce supply, but as the student housing market needs are inherently strong, the demand for PBSA should continue to surpass the offer in the next few years. 

2. Outlook 2021 - Building resilience in global real estate portfolios

In its 2021 Investment Management Outlook report, Savills presents its perspective on the commercial property markets. After performing an industry survey, Savills found that 45% of investors expect real estate investments to grow in the course of the following 12 months. About 25% of investors believe investment will remain at the same levels as now.

As the market adopts prolonged lower-for-longer interest rates, yields are depressed and investors options to meet return targets are limited. For Savills, a possible answer to the challenges being faced by financial markets is betting on alternative real estate asset classes such as student housing and PBSA. With traditional property assets (office, industrial and retail) interest rates at its lowest, alternative sectors can deliver more appealing risk-adjusted returns.

The report states that residential, specially build-to-rent multi-family and student accommodation, healthcare and senior care facilities, are generating long-term, stable income returns. Furthermore, alternative sectors such as PBSA offer more advantages over traditional property assets than higher returns: they also allow investors to diversify risk given their counter-cyclical nature.

While pondering the effect of the pandemic on the student housing market, Savills expresses a belief in students going back to university campus, since social interaction and in-person learning offer the highest value of the academic experience. Moreover, the PBSA offer in Europe still does not match the market demand, making student housing an attractive opportunity for long term investors.

Read the full report by clicking this link.

3. Student Accommodation Survey Report - Knight Frank

Between 2020 and 2021, Knight Frank has surveyed over 70.000 university applicants and students in the UK to gather insights on how they were affected by COVID-19 and which trends are set to influence student property markets in the future. The report also shares insights on students’ preferences and concerns regarding student accommodation. Right up front, Knight Frank’s report guarantees that the campus will remain at the centre of the university's offering as the number of enrollments are still predicted to rise.

Knight Frank found that 69% of students living in purpose-built student accommodation (PBSA), either privately operated or university operated, felt positive about their operator’s response to the pandemic. Only 25% of students living in private shared houses said the same about their landlord’s response. When surveyed about preferences, students indicated better WiFi, larger bedroom and on-site gym as the three main services / attributes for which they are willing to pay a premium. Cinema, swimming pool and in-house events are the amenities / services that students are less willing to pay an extra for.

To ensure students get the most out of their living experience, Knight Frank’s report highlights the importance of creating environments that foster relationships and social interaction, since mental health issues are the major reasons why students drop out of university. As 39% of final-year students declared an intention to remain in the city in which they study after graduation, the report emphasises a cross sector opportunity for developers as these graduates will require high-quality purpose-built rental accommodations. Moreover, the research reveals four main trends set to influence student property markets in 2021 and beyond: digital learning, strengthening university finances, a growing sensitivity to quality (by students) and increasing satisfaction with PBSA. 

After an extensive overview of students’ wants and needs, Knight Frank suggests investors will likely continue to bet on student accommodation as the market has performed above expectations during the pandemic and kept delivering value to students, universities and stock owners.

Read the full report by clicking this link.

4. Student Housing Annual Report - BONARD

In its 2020 Student Housing Annual Report, BONARD has gathered and analysed data from 130 markets / submarkets, 7000 PBSA assets owned or managed by private, public and religious organizations, covering roughly 1000 new developments, as well as completed transactions and projects in the pipeline. Once again, the overall results show that the impact of COVID-19 on the PBSA asset class was less dire than previously predicted.

Occupancies have decreased by less than 10% in most countries and while operators have reported increased marketing costs, investors' interest in the PBSA asset class has remained high. Moreover, enrollment figures for Autumn 2020 indicate a stable development. Based on its research, BONARD believes student mobility should start recovering from the academic year 2021 / 2022.

The report highlights that, historically, student mobility has grown even during economic crises due to multiple reasons. Ultimately, according to BONARD, the pandemic has been a testing moment for student housing resilience, consolidating it as a low-risk defensive asset class with a counter cyclical character.

Read the full report by clicking this link.

Key Takeaways

After reviewing CBRE, Savills, Knight Frank and BONARD’s most recent reports, we have found as a prevailing idea the proven resilience of the student housing market. For investors, the asset class proves to be not only a safe long-term choice, but also an opportunity to diversify risk and build stronger portfolios. For developers and operators, understanding the importance of crafting a living experience that attends to students' needs even once they are out of university will attract residents, increase retention rates and create cross sector opportunities. In essence, student housing is set to attract additional investment rounds and remain a flourishing alternative asset class for the future.

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