Category: Perspectives

Student Accommodation Continues to be a Hot Market: 3 Key Considerations Before Investing in the Sector

Posted on by lynn

Student Accommodation Continues to be a Hot Market: 3 Key Considerations Before Investing in the Sector

  • August 16, 2024
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Written and contributed by QIP's Marketing Team

The global real estate landscape is witnessing a surge in a once-niche market: student accommodation. Investor interest is skyrocketing, with Singaporean investors, including  institutions and private equity firms playing a significant role. Holdings by Singaporean companies alone have reached a staggering $22 billion, with real estate giants like GIC, CDL, and Mapletree making substantial acquisitions over the past two years, especially in the UK. This trend is projected to continue, with the global purpose-built student accommodation (PBSA) market estimated to reach a value of £104 billion by 2028.

Why is Student Accommodation Such a Compelling Real Estate Investment?

This surge in popularity begs the question: What makes student housing such an attractive investment opportunity globally? The key factors can be summarised into four points:

  • Recession-Resilient: While not entirely immune, the student accommodation market is more resilient compared to other asset classes during economic downturns, as the counter-cyclical demand for higher education drives demand for student housing.

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  • UK Student Population Surge: The UK’s student population is at its peak, with a 5% rise expected next year alone. This increase means more young people seeking university places and, subsequently, accommodation. The Universities and Colleges Admissions Service (UCAS) reports a 24% surge in acceptances from pre-pandemic levels, fuelled by a rise in international students from outside the EU.

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  • Chronic Undersupply: The supply of new PBSA in the UK is lagging due to high construction costs, stringent planning laws, and the need to modernise outdated facilities. With an estimated national shortfall of 580,000 beds, the squeeze is being felt. Despite this, investment in PBSA remains strong due to robust operational metrics and promising return prospects. As the sector navigates through economic recovery, easing inflation, and stabilising debt markets, 2024 looks promising for investors.

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  • Attractive Returns and Strong Rental Growth: Student accommodation benefits from a predictable income stream and relatively stable occupancy rates. This stability translates into attractive returns through consistent rental income and potential for capital appreciation. Rental prices have risen significantly, with PBSA costs increasing by 10.1% per person per week in 2023. This strong rental growth is expected to persist, enhancing the overall attractiveness of the asset class.


3 Key Considerations Before Investing in the Sector

The compelling benefits of student accommodation—resilient demand, consistent cash flow, and attractive returns—might have you itching to invest. However, careful planning is crucial. Here are three key considerations to navigate the market effectively:

#1 Regulatory Changes

As with all real estate investments, the PBSA market is susceptible to local and national regulations. Recent regulatory shifts in the UK, including new policies from the Labour Party, could impact the student accommodation sector. Labour’s proposed reforms aim to stabilise university funding, support mental health initiatives, and influence immigration policies affecting international students.

Our Advice: Stay informed about these regulatory changes and their potential impact on student accommodation. Engaging with local communities, universities, and industry professionals can provide valuable insights and help you navigate any shifts in market dynamics.

 

#2 Management Intensity and Operational Challenges

Managing PBSA properties involves significant operational challenges, such as regular maintenance and addressing tenant demands. Tasks like cleaning common areas, repairing appliances, and landscaping are crucial for maintaining high occupancy rates and tenant satisfaction. The complexity of accommodation setups and seasonal variations can further complicate management.

Our Advice: To handle these operational challenges effectively, adopt best practices like conducting regular property inspections to identify issues early. Ensure that on-site staff are well-trained and responsive, and use technology solutions such as self-service portals and mobile apps to streamline maintenance and management. Partner with experienced operators with a strong track record in managing complex PBSA properties.

 

#3 Understanding Evolving Student Needs

    • Student preferences and requirements are rapidly changing, with a focus on quality of life, advanced technology, personalised experiences, mental health support, sustainability, and inclusivity. PBSA operators must adapt to these changes to stay competitive and meet tenant expectations.

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    • Our Advice: Stay ahead of changing preferences by conducting thorough market research and engaging with students through surveys and feedback. Invest in technology for enhanced service delivery and offer flexible accommodation options to cater to diverse needs. Foster an inclusive environment with culturally sensitive practices and celebrations. Collaborate with industry leaders who are adept at understanding and responding to evolving student demands.

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Long-Term Perspective:

PBSA operators encounter a range of challenges, including maintenance demands, evolving student preferences, and regulatory changes. Addressing these challenges effectively requires proactive measures such as regular market research, technology integration, and a deep understanding of student needs. By partnering with experienced developers and operators who have a strong track record and expertise in PBSA management, investors can navigate these complexities and achieve long-term success.

 

QIP is a Singapore-headquartered private equity real estate firm with offices in London and New York. Our team and Principals have a distinguished track record in the residential living market, including over 15 years of experience in UK student accommodation. Consult with our team today to develop a UK PBSA investment strategy that aligns with your long-term goals and leverages our expertise in this dynamic sector.

Source:

  1. Value of PBSA sector to grow to £104bn by 2028, Knight Frank finds
  2. The rise — and rise — of global student housing investment 
  3. Guide to Property Investment in Student Accommodation
  4. Singapore investors have bought up $22bn of student housing globally
  5. Is Student Housing Recession-Proof?
  6. UK Purpose-Built Student Accommodation (‘PBSA’) – Understanding the Factors Behind This Resilient Sector
  7. Labour in power: what would it mean for PBSA?
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Strategies in Alternative Asset Management: Balancing Risk and Reward

Posted on by lynn

Strategies in Alternative Asset Management: Balancing Risk and Reward

  • March 13, 2024
Strategies in Alternative Asset Management

Written and contributed by QIP's Marketing Team

Alternative assets have become integral to diversified investment portfolios, providing investors with opportunities beyond traditional stocks and bonds. As the landscape of alternative investments continues to evolve, managing the associated risks becomes crucial. This article explores strategies in alternative asset management, focusing on the delicate balance between risk and reward.

Beyond Traditional — Understanding Alternative Investments

Alternative investments encompass a diverse range of assets beyond traditional stocks and bonds. Each type offers unique characteristics and the potential for diversification, attractive returns, and specialised exposure to niche markets. Some examples of alternative investments include (but are not limited to):

  • Real Estate: Investing in real estate directly or through Real Estate Investment Trusts (REITs) provides exposure to income-generating properties like apartments, office buildings, warehouses, and even land.

  • Hedge Funds: These actively managed investment vehicles employ various strategies to generate returns in any market condition.

  • Private Equity: Involves investing in privately-held companies, often with the goal of restructuring, growing, or improving their operations to increase value. This can include venture capital for early-stage startups, growth capital for expanding companies, buyout investments in established businesses, & distressed investing in struggling companies, among others.

  • Commodities: Physical assets like precious metals (gold, silver), agricultural products (corn, wheat, soybeans), and energy resources (oil, natural gas).

  • Infrastructure: Investments in essential assets such as transportation networks, utilities (power, water), and communication infrastructure.

Traditional Vs Alternative Investments

Compared to traditional investments like stocks and bonds, which offer direct ownership and often trade on public exchanges, alternative investments function through indirect ownership, often via funds managed by professionals.

These often involve active management strategies seeking to outperform the market, but come with a longer investment horizon due to their less liquid nature. Additionally, some alternative investments may have performance fees tied to their success. While both offer the potential for returns, understanding these key differences is crucial for investors to decide which asset class aligns best with their risk tolerance and investment goals.

Why Invest in Alternatives?

While traditional investments have long formed the bedrock of many portfolios, alternative investments are rapidly gaining prominence.

Higher returns

According to Preqin, alternative investments offer diversification benefits that can enhance overall portfolio performance. These assets often have a low correlation with traditional markets, providing a hedge against market volatility. Moreover, they can offer higher returns than traditional investments, making them attractive to investors seeking enhanced yield.

Diversification and Resilience

One of the primary attractions of alternative investments lies in their potential to enhance portfolio diversification and resilience. Unlike traditional assets, alternative investments often have a low correlation with conventional markets, providing a hedge against market downturns and economic volatility. This diversification potential can help investors achieve more stable returns over the long term while reducing overall portfolio risk.

Access to Niche Markets and  Specialised Strategies

Moreover, alternative investments offer access to niche markets and specialised strategies that may be unavailable through traditional avenues. For instance, private equity investments provide opportunities to participate in the growth of promising startups and private companies, offering the potential for substantial returns. Similarly, investments in real assets like infrastructure and real estate can provide income stability and inflation protection, making them attractive options for investors seeking long-term wealth preservation.

Understanding and Mitigating Risks

Alternative investments offer compelling benefits, but it’s also essential for investors to recognise the risks before allocating capital.

Illiquidity

Many alternative investments are less readily tradable than stocks and bonds, requiring a longer investment horizon and potentially hindering access to capital in the short term.

Complexity

Alternative investments often involve complex structures and investment strategies, requiring investors to conduct thorough due diligence and possess a strong understanding of the associated risks.

Regulatory Risk

The regulatory landscape surrounding alternative investments can be complex and subject to change. Navigating these regulations can be challenging, and unforeseen regulatory changes could potentially impact the performance or accessibility of certain investments.

Effective Risk Management

Effective risk management in investment involves several key strategies. Diversification is essential, where spreading investments across different asset classes, regions, and managers can mitigate the impact of individual risk factors, ensuring a more resilient portfolio. Active portfolio management is crucial; regularly monitoring and adjusting investments aligns them with evolving risk tolerances and financial objectives, preventing a “set and forget” approach.

Additionally, seeking professional guidance, especially for complex alternative investments, from qualified financial advisors & learned investment managers, helps navigate complexities and tailor strategies to manage risks effectively. Stress testing your portfolio under various hypothetical scenarios can also enhance resilience and prepares for market downturns.

The Bottom Line: Strategies in Alternative Asset Investment

Navigating the world of alternative investments requires a careful balance between potential rewards and inherent risks. While they offer the allure of higher returns, diversification and access to niche markets, investors must also be aware of and plan for their illiquidity, complexity and regulatory considerations.

By employing effective risk management strategies, investors can harness the potential of alternative investments and navigate this dynamic landscape with greater confidence.

Q Investment Partners prioritises rigorous risk management practices to help investors navigate complexities and maximise the potential of alternative investments. Reach out to us today to find out how we can help investors like you navigate and achieve your long-term financial goals.

Source:

Why Invest in Alternatives?
Are Alternative Investments For You?
Private Markets: 4 Steps to Help You Optimize Your Allocation to Alternatives
A Comprehensive Guide to the Pros and Cons of Alternative Investments
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Exploring the Dynamics of Private vs. Public Markets: Choosing Your Ideal Investment Strategy

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Exploring the Dynamics of Private vs. Public Markets: Choosing Your Ideal Investment Strategy

Private Equity Ideal Strategies for Market Dynamics
  • November 21, 2023

Written and contributed by QIP's Marketing Team

Making investment decisions in the dynamic financial landscape involves understanding the unique characteristics of private and public markets. In this blog feature, we delve into the details of these markets and their core differences, to help you tailor your investment strategy and align with your financial goals & risk tolerance.

Part 1: Public Markets

Public markets, as highlighted in McKinsey’s Private Markets Annual Review, stand as a cornerstone for investors, offering a range of advantages:

a. Liquidity: S&P Global notes that public markets boast high liquidity, providing investors with the flexibility to buy and sell assets effortlessly. This liquidity is particularly valuable for those who seek quick access to their investments or prefer a short-term investment opportunity.

b. Transparency and Regulation: McKinsey emphasizes the transparency and rigorous regulation characterizing public markets. Regular disclosure of financial information by publicly traded companies ensures that investors can make informed decisions based on accurate and up-to-date data.

c. Lower Barriers to Entry: Public markets offer a more accessible and often lower-cost investment option, open to the general public. This accessibility provides a wide range of investors with opportunities to participate in the stock market. The relatively low entry barriers make public markets available to both individual and retail investors.

d. Market Volatility: WealthBriefing sheds light on the cyclical nature of public markets and it’s susceptibility to significant volatility and macroeconomic uncertainty. While prices can fluctuate frequently, this volatility presents both risks as well as opportunities for investors.p

Part 2: Private Markets

Private markets, encompassing alternative investments and private equity in Singapore, offer a compelling array of factors showcasing their unique appeal:

a. Superior Returns and an Attractive Risk-Return Profile: Considering private markets becomes particularly enticing due to the potential for superior returns compared to public markets. Over time, private equity has demonstrated returns comparable to Emerging Market Equities and surpassing those of all other traditional asset classes. The combination of relatively low volatility and impressive returns contributes to an appealing risk-return profile.

b. Total Assets under Management (AUM) Growth: Total private markets AUM reached an impressive $11.7 trillion as of June 30, 2022, growing at an annual rate of nearly 20 percent since 2017. The second quarter of 2022 saw dry powder exceed $3 trillion, marking the eighth consecutive year of growth. In private equity, inventory spiked, reaching the highest ratio since 2013.

c. Resilience of Private Assets:

Investors are drawn to private assets, such as real estate investment, due to their non-cyclical nature and lower volatility. The illiquidity and absence of secondary market pricing contribute to this appeal, making private assets an attractive option, especially during times of market dislocation when financing from direct lenders in private credit becomes a reliable alternative.

d. Integration into Financial Markets: Private markets, including private equity in Singapore, have become integral to global financial markets and the real economy. The surge in global private equity- and venture capital-backed M&A transactions in 2021, totaling over $600 billion, underscores their increasing influence. Private equity and private debt have formed a symbiotic relationship, leading to a convergence between broadly syndicated and direct-lending markets. 

e. Performance Outpacing Public Equity: JP Morgan’s 2021 analysis found that the private equity industry continues to outperform public equity. Notably, private equity’s performance metrics consistently showcase outperformance against benchmark indices such as the S&P 500, S&P 600, and the Russell 2000.

Choosing the Right Investment Strategy

While public markets offer certain advantages in liquidity and accessibility, the dynamic landscape of private markets, coupled with their proven track record of growth and resilience, makes them an appealing option for those seeking long-term stability and potentially higher returns.

Diversification and due diligence remain crucial considerations. Our team of experienced professionals is ready to guide you through unique access and co-investment opportunities in institutional-grade real estate assets.

Source:

Private Markets: Still Waters Run Deep
Private vs public equity
McKinsey Global Private Markets Review: Private markets turn down the volume
Will Private Markets Overtake Public Markets?
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UK Purpose-Built Student Accommodation (‘PBSA’) – Understanding the Factors Behind This Resilient Sector

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UK Purpose-Built Student Accommodation ('PBSA') - Understanding the Factors Behind This Resilient Sector

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  • September 14, 2023

Written and contributed by QIP's Marketing Team

The student housing market in the United Kingdom has been witnessing a remarkable surge in recent years, driven by a growing demand for higher education and an increase in domestic and international students.

As a result, investing in UK student accommodation has become an attractive prospect for savvy investors seeking promising returns. This article explores the factors that contribute to the appeal of this market and sheds light on why it presents a lucrative investment opportunity.

Rising Student Population

UK universities are renowned for their academic excellence and diversity, thus attracting a constant influx of international students. With higher education enrollments soaring each year, hotspots like London, Bristol, Manchester, and Edinburgh are witnessing a thriving student housing sector. This mix of local and international students demands modern and secure accommodations near their institutions, creating a pressing need for investment. The result? A plethora of enticing, rock-solid investment opportunities. 

1. Private Landloards and HMOs Avoid Larger Housing

To meet the rising demand for student housing, it’s supply must increase. Private developers and investors can capitalise on the market gap stemming from university-provided dorms that fail to meet the needs of the modern student. This gap presents a great opportunity for investors to alleviate the supply constraints through the development of more purpose-built-student accommodations that supports students’ rising living standards.

2. Reassessing PBSA Supply Pipeline

Reassessing the UK PBSA supply chain is another recent issue. While the development of high-end PBSA initiatives have become a noticeable trend, affordable student housing is needed. The UK PBSA sector must grow to satisfy student needs. Diversifying its offerings in the market and providing mid-market PBSA to address the diverse demands of students and catering to individuals on tighter budgets both domestically & internationally

Attractive Rental Yields

With a limited supply of quality UK student accommodation, the potential for attractive rental yields becomes a significant probability that entices investors to invest in UK PBSA. The lack of supply means landlords can charge competitive rents, which leads to favourable rental yield percentages; this asset class is a lucrative option for many investors due to the higher returns on investments than traditional residential properties.

Long-Term Tenancy Stability

As it is common for students to sign tenancy agreements for the entire academic year, with some universities offering guaranteed accommodation to first-year students, ensuring consistent rental income for landlords, this long-term stability is reassuring to investors as it helps reduce the risks associated with property vacancies and fluctuations in the rental market.

Favourable Government Policies

When the United Kingdom reached its target of attracting 600,000 overseas students per year a decade ahead of schedule, the government announced it was “firmly committed” to maintaining that number.

In order to “maximise the UK’s education potential,” the update elucidates three priorities for the future. Growing and broadening the overall export base, ensuring the continued viability of the student recruitment market, and expanding the UK’s worldwide education offerings are priority.

Robust Transactional Activity & Momentum Beyond 2023

Defying market uncertainty, UK PBSA investment has surged since 2016, with the sector claiming a noteworthy 13% share of 2022’s CRE investments. A significant 82% of this investment originates from overseas sources, notably Singapore (24%). The sector is anticipating greater transactional vigour in this 2nd half of the year, fuelled by rising rents offsetting operational costs and bolstered by consistent student growth. Stripe Property Group’s forecast predicts an impressive resurgence, envisioning the UK PBSA market to reach £4.2 billion in 2023

Investors of private equity in Singapore, with a strong appetite for UK Student Housing, are familiar with the elements driving attractive returns for the sector and stand to gain from this predicted long-term growth. Market research and due diligence are essential for finding the best prospects and maximising returns in this booming industry, as they are with any investment.

Source:

Secure Trust Bank: PBSA is still attractive, provided investors follow four key principles to this type of real estate
London House Exchange: How we select PBSA properties
PBSA News: Checklist for successful investing in purpose-built student accommodation
 Savills_PBSA_Spotlight_May2023.pdf
Knight Frank: What does the journey to a million mean for UK student accommodation? 
Student_Accommodation_Market_Snapshot_April_2023.pdf
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PERE PODCAST by QIP: Conversations with Koji Naito [Part 2]

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  • Perspectives

Demographic Shifts and the Rise of Multi-Family Investments in Japan's Housing Market

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  • June 27, 2023

Written and contributed by QIP's Marketing Team

For the past two decades, investment opportunities in the Japanese housing market have increased. Japan has the biggest established real estate investment market in attracting a significant portion of investments in the region. Remarkabley, Japan’s multi-family property market has become a prominent asset class and is now the biggest in the Asia Pacific reagrding trasnaction volumes. In a nutshell, the expectations for Japan’s multi-family market this year are encouraging. 

Urbanisation and Positive Net Migration of Major Cities

Generally Osaka and Tokyo have obtained the higest slice of the huge-scale companies per capita. This distribution has resulted in a stream into these leading cities, with residents looking to reap the benefits of fitting labour market conditions. Osaka, Nagoya, and Fukuoka had a net migration that made up 33% of overall Japanese cities’ net migration in 2020. The influx of young adults aged between 20 and 29 (40%) also drove rental demand. 81% of these who are under the age of 29 resort to renting, lowering the home ownership demographic. Yet, increase in the rental market can be credited to both steady wage growth and soaring house prices. Since 2015, house prices have increased by 17.7%, while wages only increased by 1.2% over the same time span. These lifestyle and demographic changes have been prompting demand for multi-family investments. 

Japan multi-family housing as an outperformning asset class

Steady high occupancy rates (>95%) and low (1-2%) but steady rent increases for rental residentials in metropolitan territories have been backed by the persistent arrival of young people to these locations. However, the pandemic altered such a situation in Tokyo, and in 2020 and 2021, Tokyo faced a surprising decrease in population emigration. Notably, the occupancy rate and rent level of rental homes for singles dropped, as students started attending classes remotely, tourists returned to their countries, and hotel and food service businesses cancelled their lease contracts. Occupants of studio-type homes in cities have also relocated to the suburbs due to the extended timespan of work-from-home arrangements.

Nonetheless, Japan’s multi-family has generated greater risk-adjusted returns compared to other subsectors. Historically, multi-family has been less affected by recurrent downturns and was the first subsector to recover from the worldwide economic emergency and the pandemic. With its defensive attributes, institutional capital heavily favours multi-family during such critical times. In the country’s multi-family sector, cap rate compression of 50-80bps is evident in the latest portfolio transactions.

As of 2022’s third quarter, year-to-date residential investments were 8% higher than the same period in 2021, the sole sector that achieved growth across all sectors in real estate. The adverse effects of the pandemic on rental residentials for singles would be wiped out and higher activity levels would continue this 2023, with rent and occupancy growth going back to the pre-pandemic situation in leading cities (Greater Tokyo, Osaka, Fukuoka, and Nagoya).

Since 2015, house prices have climbed to 17.7%, while wages only grew by 1.2% over the same duration. Condominium units also have steep prices nowadays. Besides the rising number of small families, these prices would drive the demand for multi-family units. This event would urge families to rent than buy an asset, further reinforcing the multi-family rental demand.

 

Enhance your portfolio with Japan residential investments, guided by world-class Singapore headquartered private equity

The Japanese market’s stability and predictability are just two of the many reasons why you should invest here. We are QIP, a  a Singapore private equity real estate investment firm with an outstanding track record in the residential living market. With our deep expertise in Japan multi-family investment property market, we can definitely be of great service to you.

If you also have alternative investments in mind, please do not hesitate to reach out to us.

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PERE Trends to Watch Out for in 2023 & 2024

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PERE Trends to Watch Out for in 2023 & 2024

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  • August 1, 2023

Written and contributed by QIP's Marketing Team

Global predictions imply that economic growth will slow this year due to war, inflation, and increasing interest rates. In the Asia Pacific region, most central banks are trying to avert inflation by strengthening monetary policies. Many believe that a recession can still be adverted, APAC is in a better position globally, where milder inflation and more robust GDP growth continue. Private real estate is well positioned with healthy fundamentals to support stable income going into 2H 2023.

This year, the multifamily housing sector has continued to witness several important trends that investors should closely monitor. Firstly, there be a on-going surge in demand for affordable and workforce housing. As housing affordability remains a pressing issue in many urban areas, PERE firms are increasingly targeting investments in multifamily properties that cater to middle-income and lower-income households. These investments can provide stable cash flow and potential long-term appreciation, driven by the growing need for affordable housing solutions.

In this article, we highlight some of the key trends for 2023 – 2024, with a notable rise in the popularity of alternative investments in the real estate sector. Among these, multi-family real estate and other private equity investments are gaining significant traction.  

Let us dig deeper into last year’s data to fathom which private equity real estate (PERE) trends we are continuing to see.

Japan Multi-Family: A Lucrative Investment Avenue

Japan’s real estate market has been attracting attention from international investors, and the multi-family sector, in particular, is gaining momentum. The country’s ageing population and rising trend of urbanisation have contributed to the growing demand for rental housing. Investors recognise the potential of Japan’s multi-family investment properties as stable income generators and long-term value assets. Additionally, favourable regulations and government initiatives to encourage foreign investment make Japan an attractive market for PERE players.

Multi-Family Investment Property: Capitalizing on Changing Demographics

Beyond Japan, multi-family investment properties especially in the US remain a preferred asset class for PERE investors worldwide. Changing demographics, such as the rising number of millennials and the growing preference for urban living, have fueled the demand for rental housing in various markets. The flexibility and affordability offered by multi-family properties make them an appealing choice for both investors and tenants. As urbanisation continues to reshape cities globally, investing in multi-family properties presents a promising opportunity for generating consistent cash flow and potential capital appreciation.

Private Equity: A Thriving Hub for Investments

Private equity has established itself as a thriving hub for investments in countries like Japan, the United Kingdom (UK), and the United States (US). Each region offers unique opportunities and attractive investment environments for private equity in Singapore firms and investors.

Japan has experienced a significant rise in private equity activity in recent years. With a strong economy, a stable political environment, and a large pool of well-established companies, Japan presents opportunities for, growth capital and buyout investments.

UK’s well-developed financial infrastructure, favourable regulatory environment, and access to global markets make it an appealing destination for private equity firms seeking to deploy capital. London, in particular, serves as a financial centre that attracts both domestic and international private equity players.

The US stands as the largest and most mature private equity market globally. The country’s entrepreneurial culture, technological advancements, and access to skilled labour contribute to a thriving ecosystem for private equity firms.

Alternative Investments: Expanding PERE Horizons

The traditional avenues of real estate investment are transforming, with alternative investment options gaining traction within the PERE sector. These alternative investments include niche asset classes such as student housing, co-working spaces, data centres, healthcare facilities and logistics. Investors will prioritise prime logistics in trade centres and e-commerce countries, a sector currently experiencing historically low level vacancy rates in the UK, US, Germany, Netherlands, France & Spain. As technology continues to reshape various industries, the demand for specialised real estate assets is rising. Investors are increasingly diversifying their portfolios by venturing into these alternative sectors, which offer attractive risk-reward profiles and the potential for high returns.

Real Estate Investment: Embracing Technological Advancements

Technology is revolutionising how we live, work, and invest.

The real estate investment industry is no exception, as emerging technologies such as artificial intelligence, blockchain, and virtual reality are transforming various sectors. PERE investors recognise the importance of adopting technology-driven solutions for efficient property management, market analysis, and investment decision-making. Embracing these advancements enables investors to stay ahead of the curve, optimise operational efficiency, and enhance investment performance.

Access World-Class Global Real Estate Investments with QIP - A Leading PERE Firm in Singapore

The 2023 private equity trends are slowly revealing themselves, but many also fear what the unfamiliar ones may hold. Here at QIP, we know how to identify the best alternative investment opportunities for our clients.. Our real estate investment approach and expertise in residential housing guarantees vigorous deal flow and execution capabilities. And our track record can attest to our strong performance in the industry. Give us a call to learn more about us!

Sources

JLL –  4 bright spots for investors in 2023. Slowing global growth is forcing investors to be more selective on sector deals
Asian Investor – 2023 Outlook: Asia Pacific’s real estate markets
Construction Week Online –  Global real estate investment activity recovery predicted in 2023
KKR Real Estate – Q1 2023 Commercial real estate outlook: setting the stage for opportunities
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PERE PODCAST by QIP: Conversations with Koji Naito

Posted on by Admin
  • Perspectives

Demographic Shifts and the Rise of Multi-Family Investments in Japan's Housing Market

blank

Tweet Share Share Email

  • June 27, 2023

Written and contributed by QIP's Marketing Team

For the past two decades, investment opportunities in the Japanese housing market have increased. Japan has the biggest established real estate investment market in attracting a significant portion of investments in the region. Remarkabley, Japan’s multi-family property market has become a prominent asset class and is now the biggest in the Asia Pacific reagrding trasnaction volumes. In a nutshell, the expectations for Japan’s multi-family market this year are encouraging. 

Urbanisation and Positive Net Migration of Major Cities

Generally Osaka and Tokyo have obtained the higest slice of the huge-scale companies per capita. This distribution has resulted in a stream into these leading cities, with residents looking to reap the benefits of fitting labour market conditions. Osaka, Nagoya, and Fukuoka had a net migration that made up 33% of overall Japanese cities’ net migration in 2020. The influx of young adults aged between 20 and 29 (40%) also drove rental demand. 81% of these who are under the age of 29 resort to renting, lowering the home ownership demographic. Yet, increase in the rental market can be credited to both steady wage growth and soaring house prices. Since 2015, house prices have increased by 17.7%, while wages only increased by 1.2% over the same time span. These lifestyle and demographic changes have been prompting demand for multi-family investments. 

Japan multi-family housing as an outperformning asset class

Steady high occupancy rates (>95%) and low (1-2%) but steady rent increases for rental residentials in metropolitan territories have been backed by the persistent arrival of young people to these locations. However, the pandemic altered such a situation in Tokyo, and in 2020 and 2021, Tokyo faced a surprising decrease in population emigration. Notably, the occupancy rate and rent level of rental homes for singles dropped, as students started attending classes remotely, tourists returned to their countries, and hotel and food service businesses cancelled their lease contracts. Occupants of studio-type homes in cities have also relocated to the suburbs due to the extended timespan of work-from-home arrangements.

Nonetheless, Japan’s multi-family has generated greater risk-adjusted returns compared to other subsectors. Historically, multi-family has been less affected by recurrent downturns and was the first subsector to recover from the worldwide economic emergency and the pandemic. With its defensive attributes, institutional capital heavily favours multi-family during such critical times. In the country’s multi-family sector, cap rate compression of 50-80bps is evident in the latest portfolio transactions.

As of 2022’s third quarter, year-to-date residential investments were 8% higher than the same period in 2021, the sole sector that achieved growth across all sectors in real estate. The adverse effects of the pandemic on rental residentials for singles would be wiped out and higher activity levels would continue this 2023, with rent and occupancy growth going back to the pre-pandemic situation in leading cities (Greater Tokyo, Osaka, Fukuoka, and Nagoya).

Since 2015, house prices have climbed to 17.7%, while wages only grew by 1.2% over the same duration. Condominium units also have steep prices nowadays. Besides the rising number of small families, these prices would drive the demand for multi-family units. This event would urge families to rent than buy an asset, further reinforcing the multi-family rental demand.

 

Enhance your portfolio with Japan residential investments, guided by world-class Singapore headquartered private equity

The Japanese market’s stability and predictability are just two of the many reasons why you should invest here. We are QIP, a  a Singapore private equity real estate investment firm with an outstanding track record in the residential living market. With our deep expertise in Japan multi-family investment property market, we can definitely be of great service to you.

If you also have alternative investments in mind, please do not hesitate to reach out to us.

More Insights

Demographic Shifts and the Rise of Multi-Family Investments in Japan’s Housing Market

Posted on by qipmarketingaccess
  • Perspectives

Demographic Shifts and the Rise of Multi-Family Investments in Japan's Housing Market

blank

Tweet Share Share Email

  • June 27, 2023

Written and contributed by QIP's Marketing Team

For the past two decades, investment opportunities in the Japanese housing market have increased. Japan has the biggest established real estate investment market in attracting a significant portion of investments in the region. Remarkably, Japan’s multi-family property market has become a prominent asset class and is now the biggest in the Asia Pacific regarding transaction volumes. In a nutshell, the expectations for Japan’s multi-family market this year are encouraging. 

Urbanisation and Positive Net Migration of Major Cities

Generally Osaka and Tokyo have obtained the higest slice of the huge-scale companies per capita. This distribution has resulted in a stream into these leading cities, with residents looking to reap the benefits of fitting labour market conditions. Osaka, Nagoya, and Fukuoka had a net migration that made up 33% of overall Japanese cities’ net migration in 2020. The influx of young adults aged between 20 and 29 (40%) also drove rental demand. 81% of these who are under the age of 29 resort to renting, lowering the home ownership demographic. Yet, increase in the rental market can be credited to both steady wage growth and soaring house prices. Since 2015, house prices have increased by 17.7%, while wages only increased by 1.2% over the same time span. These lifestyle and demographic changes have been prompting demand for multi-family investments. 

Japan multi-family housing as an outperformning asset class

Steady high occupancy rates (>95%) and low (1-2%) but steady rent increases have been backed by the persistent arrival of young people to these locations. However, the pandemic altered such a situation in Tokyo, and in 2020 and 2021, Tokyo faced a surprising decrease in population emigration. Notably, the occupancy rate and rent level of rental homes for singles dropped, as students started attending classes remotely, tourists returned to their countries, and hotel and food service businesses cancelled their lease contracts. Occupants of studio-type homes in cities have also relocated to the suburbs due to the extended timespan of work-from-home arrangements.

Nonetheless, Japan’s multi-family has generated greater risk-adjusted returns compared to other subsectors. Historically, multi-family has been less affected by recurrent downturns and was the first subsector to recover from the worldwide economic emergency and the pandemic. With its defensive attributes, institutional capital heavily favours multi-family during such critical times. In the country’s multi-family sector, cap rate compression of 50-80bps is evident in the latest portfolio transactions.

As of 2022’s third quarter, year-to-date residential investments were 8% higher than the same period in 2021, the sole sector that achieved growth across all sectors in real estate. The adverse effects of the pandemic on rental residentials for singles would be wiped out and higher activity levels would continue this 2023, with rent and occupancy growth going back to the pre-pandemic situation in leading cities (Greater Tokyo, Osaka, Fukuoka, and Nagoya).

Since 2015, house prices have climbed to 17.7%, while wages only grew by 1.2% over the same duration. Condominium units also have steep prices nowadays. Besides the rising number of small families, these prices would drive the demand for multi-family units. This event would urge families to rent than buy an asset, further reinforcing the multi-family rental demand.

Enhance your portfolio with Japan residential investments, guided by world-class Singapore headquartered private equity

The Japanese market’s stability and predictability are just two of the many reasons why you should invest here. We are QIP, a a Singapore private equity real estate investment firm with an outstanding track record in the residential living market. With our deep expertise in Japan multi-family investment property market, we can definitely be of great service to you.

If you also have alternative investments in mind, please do not hesitate to reach out to us.

 

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Student Accommodation: 5 Reasons Why It’s a Lucrative Real Estate Investment in the UK

Posted on by Fabian Tan
  • Perspectives

Student Accommodation: 5 Reasons Why It's a Lucrative Real Estate Investment in the UK

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  • February 27, 2023

Written and contributed by QIP's Marketing Team

The UK student housing market has been a hot spot for investors for many years now, and the demand for purpose-built student accommodation (PBSA) remains as high as ever – with an increase in interest from real estate investors looking for alternative investments. Strong underlying fundamentals are at the core, fuelling interest in the sector through rapidly expanding student populations, strong enrolment in higher education, demand for highly-amenitised purpose-built accommodations, and a severe lack of quality stock. Making up a large part of Europe’s residential real estate stock, it delivers a vital service to thousands of students nationwide every year, providing them with a high-quality alternative to renting privately or living at home with their parents.

Discover the benefits of investing in PBSA and why it presents a lucrative real estate investment opportunity in the UK student housing market.

1. The Growing Appetite for UK Higher Education: A Boom for the Student Accommodation Market

The UK higher education system is experiencing a surge in student enrolment, with over 560,000 new undergraduate students set to start their academic journey this year. The data, as per UCAS, indicates a 4% rise compared to the pre-pandemic period of 2019. This growth trend is evident as acceptances have risen by 14% in the past decade. By 2026, UCAS forecasts that the number of undergraduate applicants in the UK will reach a million, 250,000 more than in 2021. With such high demand for student accommodation, the market has emerged as a booming real estate investment opportunity.

A graph showing projected increases in full-time undergraduate students

Source: Knight Frank Research, Student Property Report 2023

The demand for PBSA is expected to remain strong in 2023 underpinned by demographic trends, with the population of students entering university expected to continue rising and increasing participation rates. The number of international students will also increase, building on a record number in 2022.

With travel restrictions completely lifted and studying abroad back to pre-pandemic levels, this number is expected to rise significantly. UK higher education attracts students from over 200 countries globally, those who are strongly influenced by accommodation offers.   International students, especially from markets such as China and India, account for the bulk of the demand, are drawn to the high quality and safety that the purpose-built developments can provide, and are willing to pay the premium. The pound’s declining value will further encourage demand by improving the allure of studying in the UK. This year there is an expectation of seeing more students, including domestic students alike, opting for the fixed-cost model of professionally managed, all-inclusive PBSA options as they seek to maximise value and experience. Asset management companies are tapping into the high rental yields, low vacancy rates, and strong underlying fundamentals of this sector to offer investors a diversified and stable investment portfolio.

2. Meeting the Demand: A Structural Undersupply of Student Accommodation Beds in the UK Market

A graph depicting the current undersupply of bed spaces in the UK student accommodation market

The slowing supply of PBSA is expected to continue into 2023 due to key factors limiting developments that include economic headwinds, financing & construction costs, and the planning system as a barrier to entry.

The student housing sector is facing a major challenge in providing enough bed spaces for the growing number of students. According to research from Knight Frank, with an estimated 25,700 bed spaces under construction for the 2023 academic year, there is still a shortfall in supply compared to the rising demand. This is particularly evident in cities such as Bristol and Manchester, where the rising demand will continue to significantly outpace the supply 

UCAS data shows additional 69,500-bed spaces in the planning pipeline, but delivery is still expected to lag behind the growth in student numbers. As a real estate investment opportunity, student accommodation provides a unique and stable investment option, offering high rental yields and low vacancy rates. This highlights the importance of investing in the student housing market, as it offers a unique opportunity to meet the housing needs of the expanding student population in the UK.

UCAS data shows additional 69,500-bed spaces in the planning pipeline, but delivery is still expected to lag behind the growth in student numbers. This highlights the importance of investing in the student housing market, as it offers a unique opportunity to meet the housing needs of the expanding student population in the UK.

3. Record Occupancy Levels and Strong Rental Growth: An Optimistic Outview Outlook For Investors

The UK PBSA sector has shown its resilience and popularity with record occupancy levels and strong rental growth for AY 2022/23, providing investors with a secure rental income stream throughout the year and making it a popular investment option for those seeking alternative investments. The market is expected to grow with intense competition and significant rental growth prospects into the 2023/24 academic cycle. The will reassure investors of net income growth and support further investment into the sector during turbulent times.

Due to the structural undersupply of PBSA, typically markets across the UK are able to achieve 90%-92% occupancy, with certain markets and new quality products experiencing 100% occupancy for consecutive academic years. and the prospect of high total returns-driven by the uptick in rental growth are expected to contribute to the investor demand for PBSA assets. With leases renewed yearly, Landlords can price in factors such as inflation and rising energy costs continuing to fuel the rental growth trajectory. Based on our own experiences, we are proud to share that we achieved full occupancy across all our properties for this current academic year. Despite the economic challenges, QIP has remained dedicated to investing in high-quality student housing, particularly in top-tier cities across the UK. This is exemplified by our recent £15 million PBSA deal in Leeds and the acquisition of a prime site in Newcastle, where we plan to deliver a 350-bed scheme by the start of the 2025 academic year.

As a private equity firm based in Singapore, we understand the potential for strong returns in the UK real estate market, particularly in the student housing sector. We believe that investing in high-quality student housing in top-tier UK cities is a smart real estate investment strategy and are confident in the long-term prospects of this sector.

4. Resiliency of Purpose-built Student Housing Against Economic & Political Headwinds

The nature of the student housing business makes it a promising real estate investment opportunity, particularly in the UK, as it is resilient and less affected by economic headwinds. PBSA’s operating fundamentals are expected to continue growing despite global events impacting the macroeconomic landscape. However, the asset class is not shielded from all [factors] as rising energy costs and high-interest rates have also been challenging for the sector. Despite this investor, appetite remains strong as PBSA is one of the only real estate sectors to have seen a positive increase in total investment volume for 2022. This is supported by solid return prospects and the fact student housing is driven by demographic instead of economic shifts. Historical data from Shoosmiths has shown that student housing is a non-cyclical sector, in times of crises it has reliable track record of sustaining its demand for beds and student numbers. In May 2022, GIC & Greystar’s acquisition of Student Roost’s 23,000-bed portfolio in UK, presented an excellent example of institutional capital coming into student housing as it continues to be seen as a counter-cyclical and maturing asset class. City Developments Limited (CDL) recent acquisition of five high-quality purpose-built student accommodation assets in the UK, in a deal worth GBP215 million ($357 million), demonstrates their continued belief in the resiliency and potential of this asset class despite current economic headwinds.

5. An Opportunity to Diversify Portfolios through a Maturing Asset Class

Although still considered an alternative real estate asset class, the UK PBSA market is a matured investment sector with large-scale operators, sophisticated investors, experienced service professionals and wide and transparent market coverage. 

There has been a visible trend of more institutional and overseas capital entering the UK PBSA market. A record £7.2 billion was invested last year, up 69% year-on-year and notably higher than the long-term average of £4.1 billion over the previous five years. The sector’s underlying fundamentals and solid rental growth outlook represent a good investment opportunity for investors to balance their portfolios.

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Are millennial lifestyle changes driving the buzz around Built-to-Rent (BTR)?

Posted on by Admin
  • Perspectives

Are millennial lifestyle changes driving the buzz around Built-to-Rent (BTR)?

BTR - Why the coveted asset class is here to stay and may unveil some serious investment opportunity

Are Millennial Lifestyle Changes Driving The Buzz Around Built-To-Rent BTR

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  • July 22, 2022

Written by Eu Khoon Ang, Co-Founder of Q Investment Partners

The BTR(Build-to-rent) model may not yet be a well-known concept in Singapore, but its emergence and subsequent appeal spans decades. In delving into how this asset class with its underlying investment opportunity is becoming relevant to our home ground, we will need to first uncover how the nation’s rapid economic and infrastructural growth influenced the population’s sociocultural makeup, and deep-rooted desire for homeownership be it private property, or in Singapore’s public housing system.

Of course, this sentiment is not unique to Singaporeans alone, but to understand the country, we need to understand how the need for public housing arose. When Singapore first became independent, living conditions were mostly squalid for the rapidly growing population, consisting of slums and overcrowded squatter settlements as few were able to afford proper housing. The solution to this problem became known as HDB flats, which are synonymous with affordable, sanitary, and safe public housing in Singapore. This resulted in 90% of Singaporeans realising their life-long dream of being homeowners, with 80% residing in them sometimes over generations in the same flat. (HDB.gov) HDB flats are no longer seen merely as fulfilling the need for shelter but has been ingrained into Singapore’s consciousness as representing a degree of comfort, security, and a sense of belonging.

Maturing millennials and the Covid-19 pandemic

It’s no surprise that over the Covid-19 pandemic, people find themselves with opportunities for inward reflection and for putting family dynamics to the test. With many discovering themselves, needs have evolved amongst those of age to acquire an abode of their own. As the millennial generation matures, natural progression dictates that this generation slowly dominates the property market.

According to Property Guru’s latest Consumer Sentiment Study H1 2022, there is a strong preference to buy instead of rent amongst Singaporean millennials. However, those who rent cite these as their top 3 reasons:

1. Insufficient savings
2. No urgency to buy right away
3. Government regulations making it unfavourable to buy

Source: Property Guru, consumer sentiment study H1, 2022

Compounded by inflation and rising housing prices, the desire to purchase a home has also gone hand-in-hand with the desire for longer-term rentals, especially for younger millennials.

This divide between renting and buying signals the difference in life stages within the entire millennial cohort with the impetus to rent formed largely by younger and/or single individuals – contributing to the creation of investment opportunities in rental markets in Singapore, in this period. Meanwhile, older and/or married millennials who typically have spent a longer time in the workforce have more savings and are more inclined to purchase.

 A 2021 CNA article explores the probability of the BTR model being a sought after property type presenting residents benefits like more space, more flexibility, more affordability, and chances to downsize. As a result, creating investment opportunities for “many global institutional investors.”

Conversely, the UK and the US are no strangers to the BTR model, and the popularity of these housing options is a boon to many institutional investors. They not only tackle the housing shortages within cities where young professionals have been flocking towards due to a profusion of job opportunities, these builds are also tailored to the needs of tenants with amenities that enhance its residents’ standard of living— improving their overall quality of life.   

With that said, let’s look into what BTR is, exactly.

What is “Build to Rent (BTR)”?

With housing prices outpacing income in industrialized countries, there has been growth in a category of housing called “Build to Rent”. A prominent feature in the property market in the United Kingdom and the United States — BTRs are purpose-built housing apartments or single-family homes in which residents stay on yearly rentals, rather than laying down hefty deposits and signing onto 30-year mortgages; this asset class is characteristically owned by institutional investors and managed by professional operators.

What’s the difference between BTR and PRS?

Some private rental sector (PRS) schemes are owned by “buy-to-let” landlords with a handful of properties and are often not purpose built, with zero focus on facilities benefiting renters. These property types can also come in the form of individual flats spread throughout a town area. Unlike the former property scheme. BTR developments are constructed with renter-focused amenities in mind, geared towards long-term rentability. These developments are often situated in large cities, and are owned by property companies that provide institutional investors with alternative residential real estate investment opportunities.

What are the key characteristics of BTR for residents?

  • BTR residence amenities are built to create a sense of community
  • BTR facilities are customised to the requirements of the demographic, eg, working space on certain floors and shared cooking areas
  • BTR is meant to facilitate healthy lifestyles

What does the experience in the US tell us?

Experience has shown that consumer economics is driving the BTR sector: US Home Prices increased by 20.6% (Mar 21 to Mar 22 – according to Zillow), while household income only increased by 2.4% (2021 over 2020 – US Department of Housing and Urban Redevelopment). Cash-strapped millennials who can’t afford mortgage down-payments are driving the BTR sector. They are saddled with student debt, and BTR suits their stage in life. 

zillow home value

Statistics from Hunter Housing Economics also show that BTR homes are now 6% of new home builds, and USD $85 billion will be put into US BTR projects, showing a steady demand for rental homes to address economic limitations as was reported by Bloomberg (28 January 2022).

What does the experience in the UK tell us?

According to the Long Harbour Build-to-Rent whitepaper published in June 2022, the impact and the wellbeing of residents is key to the rise in the demand for high quality, professionally managed and affordable homes for renters throughout the country. As such, professional landlords are shifting focus and kickstarting the race to meeting the country’s growing demand for rental accommodation. To add, BTR housing offer high standards not only to residents on a budget but also value adds to urban planning and governance, as such, institutional investors are gunning for this investment opportunity to bring supply, as Savills UK highlights the lack of stock fueling rental growth of 7.4% per annum. It is evident that
BTR is becoming an important part of UK housing delivery, with 14,660 completions in 2021, 15% higher than the 2019-2020 average and a total of GBP 4.3 billion was invested in UK BTR in the same year. By 2026, this will reach 13.5% of annual supply.

 

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How does the Build-to-rent model benefit investors?

As the statistic and trends suggests, this shift in focus towards rental accommodation is prominent in the consumer market. Monthly mortgage payments that would usually be residents down payments on mortgages are now yield income for real-estate companies. (Savills Spotlight: Suburban Build to Rent, 14 Sep 2021).

Furthermore, the general BTR sector in US, UK and Japan have proved resilient during the pandemic: Both Invitation Homes and American Homes 4 Rent reporting occupancy levels in excess of 97% through 2020.

How does the BTR model serve as an ideal investment opportunity?

In summary, BTR can be a scalable proposition to investors, benefiting them in the following number of ways:

  • Providing better risk-adjusted returns in a rising asset class
  • Tendency for better yielding when built with lower maintenance in mind
  • Attracts a more affluent generation of renters by giving them flexibility
  • And has shown to have less resident turnover when the BTR product caters to the demographic

The BTR model looks to boom beyond 2022 and gains popularity following another year of record transaction volumes. This asset class has displayed a remarkable show of resilience over the past few years with the ability to weather the impact of Covid-19 making it a sustainable investment opportunity that satiates growing institutional investor appetite. In their race to supply demand, there will be increasing emphasis on innovative design with a strong focus on the ESG agenda. With it, the requirements for “green premiums” will become routine in the years to come.

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