Hotel conversion into student housing presents investment opportunity: Knight Frank

Driven by the shortfall in student accommodation and the growing demand for affordable living spaces.

The emerging trend of converting underperforming or distressed hotels into student housing in Hong Kong presents a growing investment opportunity, Knight Frank said.

Knight Frank noted this shift is driven by the significant shortfall in student accommodation and the growing demand for affordable living spaces among non-local students.

It also reported a sharp increase in the non-local student population, fuelled by Hong Kong’s initiatives to promote international education.

For example, the admission quota for non-local undergraduates at UGC-funded universities has risen from 20% to 40%. In 2023 alone, 62,079 student visa applications were approved, but only 35,720 on-campus beds were available, leaving a gap of 23,389 beds.

To address the shortfall, government projects and private investments are expected to add 7,900 new beds by 2027, with another 13,500 beds through hotel conversions and private initiatives by 2028.

However, the total supply of 55,000 beds will still fall short of the estimated 97,857 non-local students, highlighting a long-term demand-supply imbalance.

Knight Frank also highlighted the benefits of hotel-to-student housing conversions, such as stable returns, citing the conversion of Hotel Sav to Y83 project, which achieved 85% occupancy in its first year, full occupancy in its second, and a 14% to 18% increase in monthly rents.