Investors Warming Up to Hong Kong Student Housing

Student housing has become Hong Kong’s fastest-growing real estate play, making for a rare bright spot in a market still lagging from years of office and retail distress.

With universities flooded by mainland Chinese students and the government pushing to recast the city as a higher education hub, developers and global funds are looking to convert hotels, build dorms and grab a foothold in a sector flush with demand, Bloomberg reported. Demand is growing fast; Colliers estimates there will be a deficit of about 120,000 student beds by the 2027-28 academic year.

In the first nine months of this year, investors spent $411.6 million in dorm-related transactions, more than double last year’s count for the same period. Student housing in the city now makes up 15 percent of property deals in Hong Kong valued above nearly $12.9 million, up from 7 percent last year.

Hotels in particular have become “one of the most interesting opportunities” in Hong Kong, Blackstone managing director for real estate Pak Man Yuen said at a recent conference in Singapore. Yuen noted that struggling hotels could present ripe options for redevelopment into student housing and multifamily residences.

“There is very strong demand for dorms but a lot of accommodation available to students is not up to standard,” Nick Tang, CEO at Wang On Properties, said. Wang On previously teamed up with Angelo Gordon & Company to convert a hotel into a 720-unit student rental housing property called Sunny House targeting students, which started operating last year and has an occupancy of 98 percent. In July, the joint venture bought another hotel with eyes on adding to its student housing portfolio.

The government is raising the cap on non-local undergraduates at public universities from 40 percent to 50 percent and is carving out land in the Northern Metropolis flagship tech development for a new “university town.” Still, investors are wary of sinking money into Hong Kong, with a CBRE survey finding the city to be the hardest major market to secure debt financing for real estate development.

This comes as Hong Kong’s commercial market has been in a downturn in recent years, with values of offices falling 50 percent and retail spaces 42 percent from highs in 2018, per government data cited by Bloomberg. Student housing, then, appears to be the safest bet for now, offering “stable and predictable income,” Tang said.

— Chris Malone Méndez