INVESTMENT SPECIAL
The Netherlands Pace of Dutch office-to-resi conversion picks up Investors are increasingly refurbishing vacant office buildings in the Netherlands into student accommodation, according to a recent report from Savills. The trend simultaneously addresses the Netherlands’ office oversupply and the shortage of student housing, the report said. Evidence of the trend includes the redevelopment of Snippe in Diemen, known as project Diemervijver, involving the conversion of five former office buildings into a student campus due for delivery by early 2014. Further examples include the recent conversion of former office building Rembrandtparkgebouw in west Amsterdam into a hotel, a higher education school and 128 student apartments by landlord Pronam; and The Student Hotel in west Amsterdam, a former office building redeveloped as a 700-unit student housing complex. The Student Hotel is transforming several other buildings in Dutch university cities. Its Rotterdam location will add 240 rooms in 2014. The Hague is opening next year as well with 310 rooms. A second Amsterdam location is planned for 2015 as are properties in Utrecht, Eindhoven and Enschede. Judith Wintraecken graduated from the University of Eindhoven with a thesis on the subject, researching the conditions under which conversion to student housing would be possible. She found that there were many challenges to overcome, especially on the financial side, as office to residential conversion means a depreciation in balance sheet value. Wintraecken estimates that of the 6.9 million m2 of empty office space in the Netherlands, between 6% and 11% is suitable for transformation to student housing. Dutch student housing yields dip below offices In 2012, rents for Dutch student housing showed sustained growth and the upward trend is set to continue into 2013, according to adviser Savills. The key driver is a growing supply/demand imbalance in the market. Although market evidence is still sporadic, gross yields for prime student residences will continue to range between 5.5% and 6.5%, depending on location, asset quality and rental contract. This is lower than current achievable yields for prime offices (at 6.4%) and shopping centres (at 6.5%) in the Netherlands, showing the potential strength of this asset class. For secondary student residences gross yields can reach 7.5%. The supply/demand imbalance points to an interesting niche investment, noted Marcus Roberts, head of student investment at Savills. “In keeping with past economic downturns, student numbers in the Netherlands have grown in the weakened labour market. This has created a window of opportunity for investors to address the imbalance of student housing supply and increasing demand.”
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A further 80,000 new student housing units will be required by 2020 to meet rising demand, as an additional 150,000 student registrations are expected over the next seven years. As well as a growing number of local registrations, levels of international students are also rising largely due to low tuition fees and the introduction of more English-language courses. In the private rental market students pay on average between €310 per month for private student halls and €360 per month for solitary rooms and flat shares, while on the social housing market levels are lower, averaging at just over €200 per month. In Amsterdam monthly rents in the private market exceed €450. As the capital city, Amsterdam has the highest number of students and universities in the Netherlands, accounting for 23% of the country’s student population, followed by Utrecht (13%) and Groningen (11%). Knight Frank has put Amsterdam at number 10 in a list of investment destinations in Europe, but the adviser warns against complex regulations, which govern developments. AM develops Villa Mokum in Amsterdam AM is to build 627 studios for students as part of the Amstelcampus urban development. 279 of these will be rental units owned by Syntrus Achmea. The remaining 348 units are units for sale. These units are 28m2 to 33 m2 in size. The sale prices range from €134,000 to €144,000 including a long-term ground lease. AM is targeting parents of students to finance the purchase of the studios, making them not only a good place to live for their sons and daughters, but also an interesting long-term investment. BAM Utiliteitsbouw is the project’s construction partner. Verweij Mungra Real Estate is developing two student housing complexes on the south side of Amsterdam under the brand name Student Experience. Ravel Residence will be the first of these and located in the Zuidas area. The 820 rooms will be 21m2’s and include private bathrooms and kitchens, with rents at €485 per month excluding service costs (around €120), and furnished rooms at €575. The building will include a grocery store, laundry facilities, bike facilities, a roof basketball court, roof gardening, an employment agency, and a café. It is due to open in 2014. Their second Student Experience complex, AmstelHome, is planned to open a year later. Syntrus Achmea Real Estate invests in massive development in Leiden (Y)ours Leiden is a development in the University City of Leiden, the Netherlands. When the city announced a tender for a plan encompassing a minimum 1,000 student units, Syntrus Achmea Real Estate & Finance teamed up with VORM Ontwikkeling, Ballast Nedam and DUWO to over-deliver on the city’s expectation. 1,900 student housing units are in planned, with 600 already under construction. Syntrus Achmea is investing a total of between €40 - €50 mln in the project, and buying 25% of the student units. They are expecting yields of around 6%. “This could have been better, but as student housing by definition falls into the social housing category, we have to deal with the rules and charges that the government imposes on us”. But despite these risks and limitations, student housing is still an interesting real