PATRIZIA reasserts faith in PBSA market

Germany: Investment manager PATRIZIA has reiterated its confidence in the European PBSA sector.

Germany: Investment manager PATRIZIA has reiterated its confidence in the European PBSA sector.

The company has been active over the last few months, investing in PBSA assets on behalf of its clients in Barcelona and Turin.

In a statement on its website, the company said: “At PATRIZIA, we’ve been one of the most active investors in the European PBSA market in the past six months, having invested €550 million totalling 2,800 beds over four countries, including Denmark, Ireland, Italy and Spain. Our most recent deals were in Barcelona and Turin, comprising 1,209 beds with a total investment of €173 million, with further deals in the pipeline.”

“Student accommodation has proven far more robust as a sector than many expected two years ago, amid the worst of the pandemic. When COVID-19 hit, student housing occupancy dropped significantly, of course. At the time, many investors were looking for distressed assets, hoping to secure PBSA accommodation at knockdown prices. But this never eventuated. Investors and lenders instead battened down the hatches and waited for the COVID storm to pass. Pricing remained resilient, meaning the yield profile has remained at or close to pre-COVID levels. Indeed, heavy equity demand and compressing yields in the residential sector, coupled with negative carry due to increasing interest rates, means institutional investors are increasing their focus on other living sectors. Student, senior living and micro apartments are increasingly seen as ways to diversify their portfolios and enhance returns,” it added.

Antonio Marin-Bataller, managing director, pan-European Transactions at PATRIZIA, said: “Students returned to universities in droves this summer, so much so that there isn’t enough accommodation to house them in some cities. In Amsterdam, international students were told by universities not to come unless they already had beds secured – there were literally no rooms left.”

Student accommodation is also benefiting from strong rental growth. In most European countries, the sector sits outside the regulatory framework that constrains growth in residential rents, allowing investors in PBSA to capture the full estimated rental value (ERV) growth. That means investors seek PBSA assets that give them exposure to this growth as quickly as possible. Brexit has also impacted the sector as European students are shunning the UK and seeking alternative universities in continental Europe to avoid paying full international fees and complicated visa and entry restrictions, says PATRIZIA.

Dublin welcomed 139 per cent more European students following the UK’s exit from the European Union (EU). Universities in the Netherlands, Germany, Spain and elsewhere are increasing the number of English taught courses to capitalise on this trend.

PATRIZIA says it is particularly interested in Italy, where the PBSA market is embryonic. In Turin, there are around 107,000 full-time students, with just 6,611 beds available. Only 1,767 of these beds are modern PBSA.

In Spain, while there are pockets of oversupply in some cities, such as Seville or Malaga, in larger cities like Barcelona and Madrid, which have huge site constraints with space at an absolute premium, PBSA is a hugely attractive investment, the company says.

The European PBSA sector also benefits from global megatrends, such as demographic changes and increasing urbanisation, as more and more people flood to big cities and stay longer in education. PATRIZIA expects the PBSA sector to prove resilient if European economies nosedive. Historical data shows that in a recession more people choose to study or remain in education for longer.

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