ENLIGHTENED BET

BY ROHIT HENMANI

have become a reality globally due to current events, the continuity of education will become a more critical part of the global economy when stability returns. Despite the current challenges and the resulting uncertainty, PBSA’s position as an attractive defensive asset class remains.

For example, Singapore investors have become more active participants in the offshore PBSA space, given the limited domestic market opportunities at this time. They have confidence in student housing as a long-term asset class, demonstrated by a steady stream of capital deployment into mature PBSA markets, including the U.S., the U.K. and Australia.

When stability returns, Singaporean investment into the PBSA sector will only expand. We believe this will be driven by the steady growth of international student mobility, and from Chinese and Indian nationals looking to study at global tertiary institutions. Resumption of this trend will happen, and investors should view the international student mobility story as a long-term trend where momentum will return.

Historically, PBSA has seen strong occupancy and rental growth relative to other asset classes in challenging market conditions, including Brexit. Looking further ahead, the underlying fundamentals, including positive demographic drivers in Asia Pacific — a growing middle class, a young population and increasing higher education enrollment — all play to the attractiveness of PBSA as a longer-term strategy.

For investors, PBSA also provides steady income streams, and diversification and relative independence from factors that drive returns in other types of real estate. But the sector needs further investment, given that there exists a supply or demand imbalance for the provision of PBSA, which does present an opportunity to those with experience in the space.

As with every real estate asset class, there are risks, which we all need to be more mindful of in the current environment. For PBSA, changes in international student visa requirements, currency fluctuations that impact fee and living cost affordability, technology, and the increasing popularity of online courses are all factors investors must consider.

It is also imperative for investors to see this as a specialized and operationally intensive asset class, which requires an operating partner that has strong links to universities and the ability to provide quality, safe and secure accommodation. Investors must do due diligence on partners as reputation is a significant consideration.

Many universities are moving away from being traditional primary providers of student accommodation, which is allowing professional operators to develop platforms with strong links to universities. We also see the growth in interstate and country migration in some areas of Asia Pacific, such as Australia and India, as future demand drivers.

In short, opportunities will emerge via increased market differentiation and providing the scope for operators to target more specific sectors of the market, including both the affordable and higher end.

The importance of due diligence and selecting the right operating partner with links to educational institutions and high quality and a secure product is vital for investors. Take Australia, for example. The PBSA market is undergoing an evolution, and the market participants and flow of capital are changing throughout each stage. Singaporean investors understand this reality, and all have different operating models that help determine their PBSA partners.

Housing demand and occupancy are likely to take a hit from current travel bans and restrictions. However, PBSA stands as an asset class that is relatively resilient to economic uncertainty, as students are expected to return to school once the situation normalizes.

It’s too early to make predictions about when this situation will moderate. However, as demonstrated by novel approaches to working, social interaction and commerce, individuals and industries are getting creative. They are also looking for signs of the continuity of daily life as green shoots in an uncertain world.

Mr. Rohit Henmani is COO and Head of Alternatives, Asia Pacific, JLL