Global Student Housing Investment - The student housing market Who are the top players? The case for investment - Savills
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2019
S P OT L I G H T
Global Student
Savills Research
Housing Investment
The student housing market Who are the top players? The case for investment
Overview
IN NUMBERS
425% For the third year in
a row, global student
housing investment volumes
exceeded $16bn in 2018.
Marginally down on 2017,
volumes are still some 425%
Global student
above where they were a
decade ago.
$10.8bn Ainvested
record $10.8bn was
into student
housing in the US last year,
housing investment
driven by some exceptionally Global investment volumes dipped slightly in 2018,
large deals, including but remain high by historical levels at over $17bn
Greystar’s acquisition of EdR.
Global investment into student rose by 130% over the same Volumes in the UK and Western
4.8% average 4.8% across 15 key
Student housing yields housing totalled $17.1bn in 2018,
the third year in a row that
period). Provisional Q1 2019 data
shows a further $2.4bn invested
European were down in 2018
as fewer major portfolios came
national markets, 370 bps volumes exceeded $16bn. While in the sector globally, with to market (falling 33% and 38%
above bonds. They range down 2% on 2017, total volumes notable transactions from respectively), but the US reached
from 6.0% in Australia are still up 425% since 2008 Brookfield, Greystar, PSP an all-time high with $10.8bn
(4.11% net of bonds) to (all global real estate volumes Investments and Allianz. invested into the sector.
3.7% in Germany (3.70%
net of bonds). Figure 1 Global student housing investment volumes
■ US ■ UK ■ Western Europe (excl. UK) ■ Rest of World
34% level ranges from 34% in the
Provision at the national $20
$18
UK, a relatively well supplied
market, to 10% in Australia.
$16
41% International students are
an important source of
$14
Investment (billions)
demand and the US, UK $12
and Australia have the
highest number of them. $10
Australia’s international
student population has $8
increased 41% between
$6
2012 and 2017.
$4
64% Between 2007 and 2017 the
number of internationally
$2
mobile students grew by
64% to over 5 million, $0
according to UNESCO.
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
They are forecast to reach
8 million by 2025. Source Savills Research using RCA
The US reached an all-time high with $10.8bn
invested into the sector
All $ figures refer to US Dollar
2
The Market
Specialist developer
owner-operators accounted
for 47% of all investment
into student
accommodation in 2018
Who’s active
in the market?
A variety of institutional investors are increasingly active in
the market. But, developer owner-operators still play a key role
As student housing has matured While consolidation and Investment managers made a greater proportion of existing
as an asset class, the types of portfolio acquisitions have driven up a third of institutional funds to residential (of which
businesses investing in the sector investment volumes in the last few investment over the past three student is a key sub-class).
have changed. At first, pioneer years, specialist developer owner- years. Mapletree Investments In Europe, the largest cross
developers held and operated their operators continue to play a key role has been the most active over border institutional players
own stock. Later, sovereign wealth in the expansion of the sector and the period, first entering the include Brookfield Asset
funds and private investors began the development of new stock. student market in 2016 with the Management and Allianz. Large
buying stock as their appetite for They have accounted for 34% purchase of the 25 property Ardent developer owner-operators present
alternative assets grew. of investment into student portfolio the UK. The Singapore include Greystar, GSA Group and
Now, a growing variety of pension accommodation since 2011, and based company has since invested The Student Hotel. The latter
funds, institutions, and insurers 47% of all volumes globally in 2018. $2.2bn in student housing globally, currently operates 11 properties
actively invest in student housing. By contrast, a quarter of office according to RCA. across Europe, with plans to
These institutions, many of which investment is by developer owner- There are two ways institutional have 41 properties in European
invest internationally, accounted operators. Greystar, Scion Group buying power is increasing for cities by 2021. The Student Hotel
for around half of all student and GSA Group are the largest student housing. First, they are operates a hybrid model serving
housing investment volume between specialists, together investing over raising specialist residential funds. both students and other short
2011 and 2018. $11bn in the last three years. Second, investors are allocating stay occupiers.
Figure 2 Investment into student housing by investor type
■ Institutional ■ Developer/Owner/Operator ■ Listed/REIT ■ Non-traded REIT ■ Other
100%
90%
80%
70%
Share of investment (%)
60%
50%
40%
30%
20%
10%
0%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source Savills Research using RCA
3Investment
Greystar has invested $6.6bn
in student accommodation in
the last three years, according
to RCA
Top players
Joint ventures between global players are
common and allow investors to achieve scale
From Singapore’s sovereign wealth 20 former EdR properties, with Greystar/ Figure 4 Student housing yields
fund (GIC), to Canada’s largest pension EdR continuing to manage the properties. Q1 2019 Prime net 10 year Yield net
fund (CPPIB), to the world’s largest insurer GIC, a Singaporean sovereign wealth student government of bonds
housing yields bonds
(Allianz), a range of global players are fund, has invested $4.5bn in student
active in the buying and selling of student accommodation since 2016, making it the Australia 6.00% 1.89% 4.11%
accommodation. Joint ventures in the second biggest investor over the period. Austria 4.25% 0.31% 3.94%
sector are common, especially for the larger GIC formed a joint venture with the
Denmark 4.00% 0.08% 3.92%
entity-level and portfolio deals, allowing Canada Pension Plan Investment Board
investors to achieve scale and share risk. (CPPIB) and The Scion Group (a US France 4.25% 0.37% 3.88%
Greystar has been the single most based student housing operator), named Netherlands 4.75% 0.19% 4.56%
active player globally since 2016, and Scion Student Communities. Much of
Germany 3.70% 0.00% 3.70%
currently owns over 50,000 units across GIC’s activity has since been via this joint
the US and four European countries. venture, with notable deals including a Ireland 4.75% 0.61% 4.14%
Over the past three years, it has invested $1.1bn purchase of a US portfolio from Italy 5.50% 2.54% 2.96%
$6.6bn in student accommodation, Harrison Street Real Estate Capital early
Norway 4.00% 1.72% 2.28%
according to RCA. A significant share of in December 2017, consisting of 24 assets.
this ($4.6bn) can be attributed to its 2018 Separately, GIC was the one of the first Poland 6.00% 2.87% 3.14%
purchase of EdR, which is a student REIT major institutional investors to enter Portugal 5.50% 1.26% 4.24%
and one of the largest developers and the Australian market, when it bought a
Spain 5.00% 1.12% 3.88%
owners student housing in the US. majority stake in Iglu in 2014.
In conjunction with this acquisition, It purchased two additional student Sweden 4.25% 0.38% 3.87%
Blackstone Real Estate Income Trust blocks in Sydney for over $300m in 2017. UK 4.50% 1.10% 3.40%
(BREIT) formed a 95%/5% joint venture GIC currently owns student assets in the
USA 5.80% 2.51% 3.29%
with Greystar to acquire a portfolio of UK, US, Germany and Australia.
Bond yields as of 4th of April 2019
Source Savills Research
Figure 3 Top investors in student accommodation since 2016
Rank by total Investor Notable Joint Ventures Type Origin Markets active in Total volumes
investment 2018 (USD)
US$ 2016-18
Chapter - Greystar, United US, UK, Spain,
1 Greystar Developer/Owner $4.5bn
Allianz, PSP Investments States Netherlands, Austria
Scion Student Communities - Sovereign UK, US, Germany,
2 GIC Singapore $310mn
GIC, CPPIB and Scion Group Wealth Fund Australia
Scion Student Communities - UK, US, Spain,
3 CPPIB Pension Fund Canada $310mn
GIC, CPPIB and Scion Group. Germany
Scion Student Communities -
4 Scion Group Developer/Owner United States US $540mn
GIC, CPPIB and Scion Group.
Harrison Street UK, US, Germany,
5 Equity Fund United States $220mn
RE Cap Ireland
Mapletree Investment
6 Singapore US, UK, Canada $200mn
Investments Manager
Real Estate Operating
7 Brookfield AM Canada UK, US, France $830mn
Company
iQ Student Accomodation
Goldman (Vero Group) - Goldman,
8 Equity Fund United States UK, US, Australia $250mn
Sachs* Wellcome Trust and Greystar
(minority), Atira
9 BREIT Private REIT United States US $1.2bn
United Germany, Ireland,
10 GSA Group Developer/Owner N/A
Kingdom Spain, UK, Australia
The total investment figure for joint ventures is applied to the individual parties where split is not known
*Includes iQ Student Accommodation purchase of the Pure Student Living portfolio
Source Savills Research using RCA
4REITs
Student REITs and publically
listed student housing
operators in the UK have
continued to outperform the
real estate market in general
Student housing
REITs
A further sign of the maturity of the sector is
the rise of dedicated student housing REITs
Following EdR’s acquisition by Greystar, well, growing with a focus on university
American Campus Communities (ACC) is partnerships. Unite also has over 6,500
the only publically traded student housing beds in the pipeline to 2022, increasing the
REIT in the US. ACC is the largest owner and company’s exposure to high and mid-tier
manager of student housing in the United universities across the UK.
States, with over 200 properties in operation.
Since 2014, the REIT has performed Yields
broadly in line with real estate sector Yields have decreased as the sector has
benchmarks. In recent years the company matured and attracted a deeper pool of
has maintained the quality of its portfolio investors. Less developed countries still
by selling old assets and focused on present opportunities for yield-seeking
development on or close to university investors. In markets such as Australia and
campuses. some less mature European markets, there
Meanwhile student REITs and publically is potential for yields to decrease further.
listed student housing operators in the Even in more mature markets where
UK have continued to outperform the real student housing appears more fully valued,
estate market in general. The largest, Unite the sector still offers returns well above
Group PLC has performed particularly government bonds.
Figure 5 US and UK student housing REITs vs All REITs indices
FTSE EPRA Nareit UK FTSE EPRA Nareit US US REIT UK REIT
160
140
Index, July 2014 = 100
120
100
80
60
0
Jul-14
Sep-14
Nov-14
May-15
Jul-15
Sep-15
Nov-15
May-16
Jul-16
Sep-16
Nov-16
May-17
Jul-17
Sep-17
Nov-17
May-18
Jul-18
Sep-18
Nov-18
Jan-19
Components: US REIT – American Campus Communities (NYSE:ACC); UK REITs – Empiric
Student Property (LON: ESP), GCP Student Living (LON: DIGS), Unite Group (LON: UTG)
Source Savills Research using FTSE Russell and investor information
5The case for student
housing investment
Student accommodation has evolved from student accommodation. Many countries have Future growth in outbound student numbers is
an alternative asset class into a mainstream realised the benefit of international enrolment expected to continue to be driven by major source
investment which now attracts a variety of global to universities as a tool to fuel the domestic markets China and India. Their rate of growth
institutional investors. High income returns economy, and are now actively encouraging is forecast to slow to 1.7% per annum by 2027,
attracted the first investors to the sector, but as international recruitment. however, from an average of 6% between 2000 and
the sector has matured and yields have come in, Between 2007 and 2017 the number of 2015, according to a British Council report.
investors are now drawn to student housing’s internationally mobile students grew by 64% to
counter-cyclical income stream. In economic over 5 million, according to UNESCO. The US, Provision
downturns, demand for student housing tends to UK and Australia are host to the largest number Despite a rise in student numbers, and in turn
increase as students prolong their studies while of them. Australia, benefiting from proximity investment, student accommodation remains
they wait for the job market to improve, while to the major Asian source markets, has seen largely undersupplied at the national level. Student
those out of work return to university to upskill. international student enrollment into higher housing provision rates (number of beds / full time
education rise 41% between 2012 and 2017. The students) in major markets range from 34% in the
Internationalisation of number of international students increased by UK to just 10% in Australia.
higher education just 8% in the UK over the same period.
International students, unfamiliar with local International students numbers in mainland
Internationally mobile students
housing markets (and often with higher budgets), Europe are rising rapidly too, attracted by English
are an important demand base for purpose built Taught Programmes and lower cost tuition.
grew by 64% to over 5 million.
Figure 6 Student housing provision, selected national markets
40%
34%
(student beds / full time
35%
30%
Provision rate
students)
25%
20% 18%
15% 11% 10%
10%
5%
0%
UK Netherlands Germany* Australia
625,000 beds 125,000 beds 180,000* beds 87,500^ beds
1.9m F.T. students 680,000 F.T. students 1.6m* F.T. students 917,000^ F.T. students
F.T.: full time. *top 30 cities ^Greater capital cities
Source Savills Research
OUTLOOK
Competition for Opportunity in the Beyond students: Investment outlook:
international students: middle tier: To date The co-living model mixes An impediment to expansion
While international student developers and investors students with other of the sector to date has been
numbers continue to have focused on the occupiers. This broadens relatively restricted operating
rise globally, competition premium end of the market. the demand base as well as platforms, but this is changing
for them has never been There exists significant supporting a wider range as they mature and expand
greater. The UK has potential in serving the of services and amenities, their capabilities, giving
announced a strategy to middle tier between low- in turn enhancing the comfort to core investors.
boost numbers by 30% over quality university stock and appeal to occupiers. We We expect to see continued
the next decade, supported new premium product. anticipate further portfolio diversification
by post-study visa Partnerships with hybridisation and merging among major investors in
extensions of up to a year universities or social of the residential asset student housing to include
for international students providers to upgrade classes to come. the whole spectrum of
to find work. This still falls existing properties may residential assets (multifamily,
short of the 18 month be means to achieve this. co-living, senior housing), as
extensions offered by the greater efficiencies through
US and Australia. shared-management
platforms are sought.
6Savills World Research
We monitor global real estate markets and the forces that shape them. Working with our teams across
the globe, and drawing on market intelligence and published data, we produce a range of market-
leading publications, as well as providing bespoke research to our clients.
World Research
Paul Tostevin Sean Hyett
Director Analyst
+44 (0) 20 7016 3883 +44 (0) 20 7409 8017
ptostevin@savills.com sean.hyett@savills.com
Capital Markets
Simon Hope Marcus Roberts James Snaith
Head of Global Capital Markets Director Director
+44 (0) 20 7409 8725 +44 (0) 20 7016 3799 +44 (0) 20 7016 3762
shope@savills.com mroberts@savills.com jsnaith@savills.com
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