A look into the Student Accommodation sector
Despite the impact from covid-19, leading occupancy in student residences to temporary fall, the Purpose-Built Student Accommodation (PBSA) market is expected to grow exponentially over the coming years. Investment volume in Student Accommodation recorded over c.€400 million in 2021 (+21% vs. 2020). The profile of active investors in the market is mainly international, although the creation of joint ventures (JVs) with international capital and local knowledge is becoming increasingly popular.
This growth will remain driven by favourable demographic trends. Increasingly, Spanish students are moving outside their province of origin in search of specialised studies or prestigious universities. The number of international students attracted by the Spanish education system also continued to grow during 2020 (+8% vs. 2019) and according to the INE; the university age population (18–24) will grow year by year, and forecasts a 13% increase by 2031 vs. 2021.
Student Accommodation Assets located close to the city centres, continue to attract the highest investor interest, with Madrid, Barcelona and major university cities like Valencia, Malaga, Granada and Pamplona being the preferred destinations for developers and investors to develop new projects. Closing 2020, there were 1,053 student residences operating in the Spanish market, with 97,290 beds. Despite institutional operations in the last years, the sector remains highly fragmented. By the end of 2022, total PBSA capacity is expected to reach c.111,000 beds, (+14% vs. 2020).
The PBSA sector continues to offer higher yields when compared to other traditional real estate sectors. The prime PBSA yield stood at 4.75% in Madrid and Barcelona and at 5.25% in regional cities, but they are expected to compress in the near future following the investors’ appetite for this Asset class.
From CG Capital Europe, we anticipate large operations taking place in the upcoming year, as the generalized uncertainty fades and investors take advantage of opportunities arising from unmet demand.