Saturday 21 September 2019

Student accommodation development soars but new investments set to slow

Dublin yields beat markets in Europe

Comfort zone: Student accommodation in Dublin, Cork and Galway produces healthy profits for developers and investors
Comfort zone: Student accommodation in Dublin, Cork and Galway produces healthy profits for developers and investors
Donal Buckley

Donal Buckley

THE purpose-built student accommodation market has seen continued growth in both development and investment activity over the 12 months to the end of June.

According to a report by Cushman & Wakefield, a total of 2,133 PBSA bed spaces have completed construction during the period bringing total standing stock in Dublin to 13,476 bed spaces.

As of midsummer, some 4,313 bed spaces were under construction in Dublin, with a further 968 under development across Cork and Galway.

That needs to be seen against a backdrop of 76,381 full-time students attending higher education authority universities and colleges in the capital with a further estimated 16,150 in private colleges.

However, as the current volume of stock completes construction, the number of commencements is anticipated to slow.

Although there remains a high volume of bed spaces in the planning pipeline, the report says it is less clear what proportion of this will reach construction stage, as some schemes may be considered for alternative uses.

Consequently investors in the sector are expected to focus more on completed projects rather than forward purchases. Last year nine investment deals saw the sector generate €181.6m in sales.

Already this year AIG Global Real Estate (GRE) agreed a forward funding deal of the Ballymun North Quarter Project for about €46m.

Discount retailer Lidl is developing this 364-bedroom space project at Main Street, Balcurris Road, Ballymun.

AIG GRE said at the time that it is also "investigating the potential" for additional investments in Dublin student accommodation.

Meanwhile, Savills declined to comment on a report that DWS, the asset management arm of Deutsche Bank, may be about to pay around €160m for the Point Campus near Dublin Port.

DWS had been reported to be the preferred bidder on what has been described as the country's largest off-campus student accommodation centre.

The 966-bedroom Point Campus was developed by BlackRock Real Assets and Cork developer Michael O'Flynn, who together paid more than €20m to Nama and CIE for the 2.3-acre site in 2016. Point Campus is operated by Host, Mr O'Flynn's student accommodation management company.

Emma Reardon, senior analyst at Cushman & Wakefield, said attractive yields, stable income and summer rental income will continue to drive investment transactions within the sector. "Yields in Dublin remain higher than in established European markets, providing good value for potential investors," she added. 

GSA was the largest private developer of in the 12 months to June with a combined 867 bed spaces added.

Uninest dominates the market with 1,860 bed spaces across five developments and two more projects due by the end of this year.

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