Sovereign wealth funds quadruple investment in student housing
Sovereign wealth funds have quadrupled their investment in student housing in a bet on the growth of wealthier middle classes in emerging economies who want to send their children to study abroad.
Investment in student accommodation in the US and Europe has gone from less than 4 per cent a year of worldwide spending by SWFs between 2011 and 2015 to more than 15 per cent in 2016, according to the latest figures from IE Business School in Madrid.
Javier Capapé, director of the Sovereign Wealth Lab at IE Business School, said: “SWFs are looking at ways they can invest for the next 10 to 15 years and capture trends that will affect their returns and give them a profitable business.
“They expect middle-class families in places like China and India to increasingly be able to send their children to study in Europe and the US.”
Singapore’s GIC wealth fund was the most active investor last year with a string of deals, including a $1.6bn student accommodation deal in the US alongside the Canada Pension Plan Investment Board (CPPIB) and property management company Scion Group, and the £700m acquisition of student halls in the UK.
SWFs have also increased their investment in commercial warehouses across Europe as ecommerce continues to grow.
Between 2011 and 2015, large institutional investors spent an average 21.5 per cent a year of real estate investment on logistics and industrial properties, IE reports. In 2016, spending in the sector accounted for 26.5 per cent. The biggest deal in the sector that year was GIC’s €2.4bn purchase of P3 Logistics Park.
In the first six months of 2017, logistics accounted for 75.8 per cent of all real estate foreign direct investment thanks mainly to China Investment Corporation’s €12.25bn acquisition of Logicor, a pan-European logistics company.
SWFs are looking further afield and becoming more creative about niche investments, the report said.
Since 2011, many have started looking more at “real estate sectors that were once deemed gritty and obscure, such as industrial warehouses on the outskirts of major metropolitan areas and student residence halls in leading university towns”, added the report, which was sponsored by the Spanish Institute for Foreign Trade.
Figures last year showed sovereign wealth funds investing more in the hotel sector and pursuing more private transactions, as they move away from buying “trophy” assets such as Porsche, Tiffany and LVMH.