The rise and rise of Purpose-Built Student Accommodation in Europe
UK Student Accommodation has seen record levels of investment, providing Purpose Built Student Accommodation (PBSA) in major cities with great locations, amenities and easy access to universities. In contrast, the sector is still developing across continental Europe but higher education is a global business with international students expected to reach 7 million by 2020.
New accommodation operators are looking to secure market share in Europe with ambitions to differentiate their accommodation from their competitors with enriched spaces, amazing learning environments and peace-of-mind for students away from home.
But why now? Why is the European market so popular at the moment?
European universities are leading the way in quality. In the latest Q5 World Rankings 2018, there were 269 European universities. That is 38% of all universities globally. They’re also seeing a substantial increase in the number of international students enrolling across the continent. The number is expected to exceed 7 million by 2020. One factor is that many European universities are introducing English Taught Programmes (ETP). In 2007/8, there were only 500 such courses, compared to a huge rise to 6000 in 2017.
All of this means more growth. Since 2010, over 80% of all investment into PBSA in Europe has been focused on the UK market, but this investment is now beginning to spread across the rest of the continent. According to the Regional Studies Association (RSA Europe), 13.6 bn EUR was spent on PBSA transactions in Europe in 2017, up 29% on 2016.
Previously, PBSA portfolio deals in Europe have been rare as a result of the cultural impact of most students preferring to live at home like in Spain and Italy or, the prevalence of university owned assets, limited number of private investors and the lack of institutional grade stock.
The more established European student accommodation markets are seeing huge growth. According to Savills data, in 2016 annual investment in France was up 245% and 380% in Germany, in line with the increase in student numbers. However, this hasn’t necessarily translated into a huge development in the PBSA market – but things are changing.
In Germany, although the PBSA share of the market sat at 11% in 2017, by that point there had been year-on-year successive growth for 9 years. The picture in France is healthier, where PBSA provision rose to 15.4% of the market in 2017. However, it’s in the Netherlands where real change has begun to happen. Between 2015 and 2017, the Netherlands saw 714million EUR in PBSA transactions. This may be due to the 46% increase in students in the decade by 2017, but is certainly helped by the appeal of the properties of operators like The Student Hotel who have seven sites in the Netherlands and are expanding across the continent.
In countries like Italy and Spain, the numbers of national students have been falling, but the size of the international student body has been increasing (by 36% between 2007-2017 in Italy). As the international student populace is the main market for PBSA, this should not affect the development of the PBSA market. Indeed, in the last two years, Fondo Aristotele, an Italian real estate fund for university buildings and a partnership between Hines and Blue Noble, specialists in fund management, have opened new sites in Italy. The Student Hotel has opened new sites in Italy and in Spain, where they’ve been joined by Threesixty Developments and Corestate.
The growing market isn’t just limited to Western Europe. In the Czech Republic, the number of international students has doubled to 14% in the last decade and Prague and Warsaw are regularly seen as some of the cheapest student cities.
Although the national student number may be falling, international students are the market for PBSA. Less aware of local markets, they increase demand for many PBSA properties and, more importantly, they are the customer base being catered for by the boom in the number of ETP courses.
According to Class of 2020, EUROSTAT in 2019 noted an upward trend in demand for HE in Europe. With demand for PBSA outpacing supply, it’s clear that this is a growing market, with a lot of room for growth.
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