Student Residences: A Booming Real Estate Asset Class
During H1 2022, the Student Residence market accumulated a total investment of €1,217 million, (+362% vs. FY 2021), with a €200 million pipeline that could be closed before year end. The estimated investment volume for 2023 and 2024 is €2.8 Bn, bringing the forecast investment pipeline to €3 Bn.
Spain has a total supply of c. 95,000 beds (representing a 15% growth in the number of beds over the last five years), to which 18,000 beds under development must be added. Of the number of operational properties, only c. 40,000 beds (43%) are of the latest generation: recently built or refurbished and with services adapted to demand.
The investment in this sector has skyrocketed. This growing demand main drivers for this asset class are:
- The university supply in Spain is wide and recognized, as evidenced by the fact that several Spanish universities are among the best in the world. Thus, there is an increasing movement of students, both intra-border and from other countries. An increasing number of foreign students are choosing Spain seeking for a place in one of the 83 Spanish universities (50 public and 33 private), either to study their entire degree/master or to take an Erasmus course.
- The supply and demand gap is much more visible in Spain than in other European countries. The student bed provision rate (Bed Occupancy Rate/Bed Utilization Rate) stands at 6.5% in Spain, which is far below the European average of 19%.
The mismatch between supply and demand, together with the reduced institutional quality operating product, continues to drive the sector’s development activity. As a result, investment in this sector continues its upward trend in response to the growing unmet demand for accommodation. More and more investors and operators specializing in student residences, attracted by its different characteristics compared to other mature markets, are entering the Spanish market encouraged by a high national and international demand for accommodation.