‘Strong demand’ for student housing pulls investors into Irish market

‘Silver tsunami’ of baby boomers expected to drive capital into nursing home sector, says Cushman & Wakefield

High demand from students for housing has “proven attractive” to property investors, with the purpose-built student accommodation sector accounting for almost one fifth of investment in the Irish rented accommodation sector in the first half of the year.

Fresh data from property agent Cushman & Wakefield shows that the broader living sector of the Irish property market — which includes the private rented, purpose-built student accommodation and nursing home sub-sectors — recorded “robust levels of turnover” between January and the end of June.

Total investment within the overall living sector for 2022 stood at €877 million by the end of June, a “marginal decrease” on the same period last year but broadly “healthy”, the company said. The Republic remains a top destination for foreign capital, with overseas investors representing 63 per cent of total turnover in the living sector in the first half.

Overall, the second half of 2022 is likely to see lower levels of investment and commencement activity, said Kate English, chief economist at Cushman & Wakefield, despite “anecdotal evidence suggesting that construction costs are easing”.

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“As there is still a lack of housing stock readily available, 80 per cent of investment activity in the living sector is forward commit style transactions, with 20 per cent generating income at the point of sale,” Ms English said. “Due to this, in the short term, investors may want more scrutiny of costs, contractors, timelines to completion and fixed price contracts in order to progress with transactions. This will lead to a slower second half of activity in 2022.”

Accounting for more than three-quarters of the €877 million invested in the first half, private rented accommodation continued to be the most attractive subsector for investors in the first half of 2022.

But purpose-built student accommodation accounted for 17 per cent of the total investment volume, up from essentially zero for the same period in 2021.

Student unions have warned this week of an unprecedented housing crisis due to rising student numbers, scarce private rented accommodation and pressures linked to housing Ukrainian refugees.

Adding to those concerns, Cushman & Wakefield analysts said: “It is clear that from 2022 onwards, the delivery of new bed spaces within the [purpose-built student accommodation] market will reduce significantly as commencements for these schemes have slowed.”

However, reflecting “high demand” for student housing, the report indicates that a “strong occupational recovery” in the student accommodation subsector for the 2021/2022 academic year, “has proven attractive to investors”.

The biggest first-half transaction in the broader living sector was Bain Capital and Carrowmore Property’s sale of the Project Ruby student accommodation portfolio for €145 million to Ares Management Corporation and Generation Partners.

The nursing home sector, meanwhile, accounted for 7 per cent of total living sector turnover in the first half and is primed for growth, the report indicates. Due to Ireland’s ageing population, a “silver tsunami” of baby boomers entering the senior housing market is expected “imminently” and in the UK, a “wave of capital” is already targeting the market.

Consequently, Irish senior living assets are likely to take their place “alongside the more traditional living assets, such as student accommodation and the private rented sector”, over the coming years.

Ian Curran

Ian Curran is a Business reporter with The Irish Times