Dutch conversion of office buildings to student accommodation attracting real estate investors

Investors in the Netherland are increasingly refurbishing vacant office buildings to turn them into student accommodation, simultaneously addressing the country’s current office oversupply and a shortage of student housing.

hollandstudentWith growing demand for student accommodation in the Netherlands against a shortage of supply the sector is becoming increasingly attractive to both domestic and international investors, according to a new market report from real estate advisor Savills.

Evidence of this trend include the redevelopment of Snippe BV in Diemen, known as project Diemervijver, involving the conversion of five former office buildings into a student campus including 534 student housing units to be delivered by September 2013 and a further 402 by early 2014.

There is also 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 which is currently being redeveloped as student housing.

Jeroen Jansen, head of research at Savills in the Netherlands, said that the redevelopment of former office buildings into student housing accommodation is helping to alleviate a problem in both markets.

‘Banks are more and more willing to finance this sort of property and achievable yields are in the region of 6.0% and 7.0% depending on location,’ he explained.

Student registrations are expected to increase 15.7% to 767,000 students by 2025 requiring approximately 60,000 new student beds in this period to meet the rising demand. The supply shortage is further reflected in the time students have to wait to obtain a room, recorded at an average of 16 months in 2012, or 23 months in Amsterdam.

Nonetheless, the international real estate advisor suggests that in order for student accommodation to become a mainstream asset class the Dutch government needs to revise its strict regulations which stipulate maximum rent levels.

‘Interest in student housing is notably growing, however we believe that for this sector to graduate from niche to a main asset class in the Netherlands the current government regulations need to be adjusted to allow for a fully commercial operation of student housing alongside the regulated segment,’ said Jan de Quay, investment director at Savills Netherlands.

‘This way the undersupply can be addressed more quickly and domestic and international students will be able to choose from a variety of suppliers from budget to high end,’ added de Quay.

Marcus Roberts, head of student investment at Savills, also pointed out that overall there is a shortage of student housing across Europe where student registrations are rising but markets are still immature compared with the UK and US.

‘This is has created an opportunity for buyers wishing to tap into the shortfall. We are currently seeing particular investor interest in Germany, France, Ireland and the Netherlands,’ he added.