Build-to-rent could become more attractive after COVID-19
Property Forum’s latest online panel focused on the effects of COVID-19 on alternative asset classes such as student housing and build-to-rent. European investors, regional experts and local developers discussed how the popularity of alternative assets among investors might change once the crisis is over.
With regard to student housing, the current pandemic can develop new structures of living, especially for younger people. Student housing buildings can offer solutions for groups and not just for individuals to be isolated in their homes, argued John Harcourt, Managing Director at Kajima Properties.
The biggest concern is, however, that development sites will not be ready by the new semesters as there are some delays in the projects, which means getting the product to the market is an issue due to the coronavirus crisis, he added.
According to discussions with market participants, the overall sentiment is that developers, as well as operators, are doing fine in the student housing sector, despite the coronavirus crisis. There are fewer competitors from the hotel and office markets which provides a good opportunity, said Samuel Vetrak, CEO of Bonard. Furthermore, there is a shift in destination preferences of students, especially from Russia, China or Brazil. Seeing the experiences of the current epidemic, capitals of CEE, in particular Warsaw, Prague and Budapest, can become more popular compared to New York or London, he added.
Tomas Grižas, CEO & Co-Founder of Houseys, explained, that in Kaunas, the second-largest city of Lithuania with around twelve thousand students, about 50 percent of the students have left in the last weeks due to the crisis, while only 10 percent of them have cancelled their agreements. According to the expert, seeing these numbers, we can expect some of the big players to come over to the Baltic region as well.
As the value of the ability to have self-isolation and privacy will increase, room layout will be a key issue for student housing as well as hotels, stressed Harald Hübl, Investment Director at Value One Holding. The experience has shown that rented place is more stable, however, most governmental interventions have happened in the residential sector. Not surprisingly, as the residential market is crucial for governments due to the enormous number of voters.
According to Maximilian Mendel, Head of Living Investment at JLL, the living asset class which seems to be most resilient to the crisis is residential for rent. If we look at the cash flow, we can see only a five percent decrease in rental revenues. There are many opportunities in the sector during the crisis.
As residential for rent is a new asset class in Poland, there are not many developments yet, so the disparity between supply and demand is huge now. The cash flow is stable due to the higher demand and the ability of credit scoring and picking tenants, pointed out Jan Trybulski, Vice President Investments at Griffin Real Estate. As stated before, it is very resilient in the crisis, so after the pandemic like this, we can expect it to become even more attractive for investors.
It is noticeable, that investors based in the United States are more pessimistic than those based in Europe and London, added Stan Kubacek, Investment Director for Europe at Round Hill Capital.