On March 14th, Royal Decree 463/2020, declared a state of emergency because of the health crisis caused by COVID-19. It mandated the suspension of face-to-face educational activities at all levels and their continuance through remote and online methods. This caused various universities, especially face-to-face universities, to make a great effort in a short period of time to make the transition to distance learning, as well as the adoption of corresponding evaluation metrics.
This situation has also affected university residences, which have seen young students move back home from the cities or countries where their school is located to complete their undergraduate or master´s degrees.
Student residences, considered one of the most profitable real estate segments in Spain, have suffered a drop in investment due to early student departure, a reduction in rental income from contracts that have been signed during the period and/or delays in ongoing projects, all as a result of the crisis caused by the pandemic.
The commercial real estate company JLL found, in a survey of the main players in the sector, that 88% of them have seen their business affected by coronavirus, but only 17% think that these effects will last more than 12 months.
The threat of new waves of the virus, restrictions imposed by different countries, and a shortage of vaccines have made it very difficult for international students to move, so operators in the sector have focused their strategy on domestic students by offering incentives and implementing health and safety measures to ensure a safe stay in their residences.
Not all news is bad though. Kirk Lindstrom, chief investment officer of Round Hill Capital (RHC), said in an interview with Europa Press in October 2020 that “Spain is an attractive country to invest in and has a lot of potential, despite the COVID-19 crisis, for its strong long-term investor fundamentals.” Earlier this year, RHC, specializing in investment, development and management of real estate assets, acquired a 12,800 square meter tract in Aravaca (Madrid) for the construction of student housing, whose opening is planned for the 2023/2024 academic year.
This transaction represents entry into the Spanish market of a new player that is actively seeking new investments in our country, and is aware of the significant imbalance between supply and demand for high-quality student accommodation, as reported by the Real Estate Observatory. Proof of this is that, during the 2019-2020 academic year, there were a total of 526,300 young people who sought accommodation compared to 94,057 places available, according to JLL experts.
Moreover, in November of last year, the operator with the largest supply of student beds to date in Spain, RESA (a consortium formed by Greystar, AXA, and CBRE Global Investment Partners) acquired four student residences, totaling 145 million euros, with the real estate developer Urbania and Invesco.
According to elEconomista, this transaction is considered the second largest in the sector. Following this transaction, Jeffrey Sújar, a partner at Urbania and CEO of the student housing division, stated that this operation was a symbol of the great interest that the student housing sector continues to attract among institutional investors.
Future forecasts are favorable in a sector where, despite the slowdown caused by the coronavirus, significant asset buying and selling operations have continued to occur and new projects are being developed.