Allianz, Bouwinvest lead interest in Asia student housing
Interest in purpose-built student accommodation (PBSA) in Asia is on the rise among European investors, with Allianz Real Estate and Bouwinvest both expressing some interest.
With Australia as the starting point for the wider Asia-Pacific region, this commercial property niche is starting to draw investor glances further north towards Asia’s most institutionalised and developed markets, investors told AsianInvestor.
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How long it takes to translate that into actual capital flows is another question.
“Tokyo, Shanghai and Beijing as 24/7 cities, having good universities attracting domestic students, could present PBSA opportunities in the long term,” said Rushabh Desai, the Asia-Pacific chief executive of Allianz Real Estate.
Tokyo today has a very established market for multifamily residential assets available for institutional investors, paving the way for a subsector such as PBSA, he said.
Shanghai and Beijing, Desai added, are further back but are beginning to develop rental residential products too.
And further back still but also catching the real estate eye is India, where some co-living operators are dual branded as co-living and student housing, as in China, according to Nicholas Wilson, director of capital markets research at JLL Asia Pacific.
Tjarko Edzes, director for Asia-Pacific investments at Bouwinvest, agreed that a multifamily residential market is a valid indicator of PBSA potential, especially when combined with urban campuses that might attract a substantial pool of potential student tenants.
Bouwinvest is the property investment arm of the Dutch construction industry pension fund bpfBOUW, with assets under management of €12.1 billion ($13.4 billion) globally. It began investing in Australian student housing 3.5 years ago.
“We really liked the combination of good quality universities located in the city centre and being able to develop accommodation in very strong locations with growing student populations,” Edzes told AsianInvestor.
“[But] other than Australia, where we have seen the market institutionalise over the last couple of years, other markets in Asia are still at an early stage of development,” Edzes said. “In terms of multifamily ... Japan is the only market in Asia that has an established institutional multifamily market.”
Still, some regional markets are at least moving in the right direction, which is why Bouwinvest has begun to invest in rental housing in Shanghai, having last year invested €75 million in six build-to-rent residential projects in Tokyo.
STUDENT SURGE IN AUSTRALIA
Allianz Real Estate's Desai sees Australia staying as the most attractive student housing option in the short to medium term..
“In Australia, PBSA provides [a] 100 to 150 basis points yield pickup over office,” he said. “This combined with a healthy 2% to 3% rental growth profile makes it an attractive yield play product.”
It's why the insurer division this week entered into a student housing joint venture with Axa Investment Managers-Real Assets, the property and infrastructure investment management arm of the French insurance group, with PBSA specialist Scape Australia as the operating partner. The investment vehicle will have a total equity capacity of A$1.5 billion.
Beyond Australia, both Edzes and Desai see a number of areas where regional PBSA markets need to improve to really accommodate institutional investor appetite.
“It is a combination of product quality and availability, quality of the operator, demand/supply dynamics and value proposition,” Edzes said.
But the potential is there and growing as higher education becomes more affordable for a growing number of people.
After all, as Nicholas Wilson, director of capital markets research at JLL Asia Pacific, notes, the world's largest tertiary student populations are in China and India with 44 million and 33 million, respectively.
STUDYING CLOSER TO HOME
But of these students, tens of thousands (if not more) of the most affluent, well-connected and brightest head elsewhere each year, not least to Australia.
So the key for Asian student housing markets, given the current lack of supply of assets on a large-enough scale for institutional investors, will be for universities in these locations to become more established and sought after.
In the latest QS World University Rankings, the highest-placed Asian institutions in joint eleventh place are Nanyang Technological University, Singapore, and National University of Singapore. They are followed by Tsinghua University (16th), Peking University and the University of Tokyo (joint 22nd), University of Hong Kong (25), Hong Kong University of Science and Technology (32nd), Kyoto University (33rd) Seoul National University, (37th), and Fudan University (40th).
It is why Japan, for now, with its relatively well-regarded universities and social stability, appears to be leading the way in Asia as it attempts to increase its international student population and develop an institutional market for student housing.
Allianz Real Estate, the property arm of the German insurer and pension fund group, had AUM of €63.5 billion globally at the end of 2018, having recently upped its presence in Asia with property investments in India and Singapore. It has been investing in student housing globally since 2015, with a total exposure as of end-June of €1.3 billion, according to Desai.
After well over a decade investing in Asia-Pacific real estate, Bouwinvest opened its first dedicated office in the region in January 2019.