Key investors and their strategies in the expansion of European student housing investment

Abstract

The aim of this paper is to understand the expansion process of investment into Purpose Built Student Accommodation (PBSA) in Europe by examining transformations in student housing investment landscapes and uncovering the profiles and strategies of key investors between 2010 and 2020. Using data from Real Capital Analytics, trends in capital structures and profiles of PBSA investors are identified. Investors driving these trends are scrutinised in terms of their investment timelines, locations, hold periods and strategies of portfolio diversification. Furthermore, in-depth interviews with property analysts, PBSA investors, and developers substantiate the quantitative analysis. The empirical results show that Private Equity entered the European PBSA market, starting with the UK, when the yield premium post-GFC justified the perceived risk. Equity funds typically hold their portfolios for around five years and trade counter-cyclically with institutions such as pension funds. PBSA specialists, mainly REITs, have accumulated substantial portfolios, and the REIT structure is well-suited to the steady income which student rents should provide, but their lack of diversification leaves them vulnerable to changes in student demographics and accommodation requirements.