A new report by Colliers International and international law firm CMS has revealed that Central and Eastern Europe (CEE) may be facing a significant shortfall in student housing over the next 10 years, creating more than €1.2 bn of development opportunities.
The firms’ third annual joint Real Estate report, ‘Student housing in CEE – the next big thing?’ looks at the evolution of the student housing sector in the core CEE-6 countries, and canvasses views from investors on the relevance of CEE student housing as an asset class and their expectations for the future.
'Student activity and spending is not especially moving in line with an economic cycle,' said Mark Robinson, CEE research specialist at Colliers International. 'These characteristics are worthy of investor consideration right now, given that GDP growth estimates for the Eurozone (and other countries around the world) are being revised downwards.'
Significant supply shortage
According to the report, most CEE cities will suffer from a significant shortfall in student accommodation by 2028.
Using a demand-supply model, matching a calculated assumption of the number of international students in the city against the supply of beds, it is suggested that Warsaw will have the highest housing shortfall in 2028 (-8,399 bed deficit), followed by Budapest (-3,679), Krakow (-1,227) Prague (-1,795) and Bratislava (-298). Bucharest is the only city in the report to come out with a surplus. In this scenario and counting one bed per bedroom unit, the implied value of stock equates to €1.22bn.
Over 32% of investors surveyed for the report are active in student accommodation in CEE or indicated that they intend to be. Poland was ranked as the most popular market for both existing investment activity and those considering investing in the future (50% of respondents), followed by Czech Republic (28%) and Hungary (14%). As the report reveals, supply in many regions is falling well short of forecasted demand.
Development drives
The report also suggests that over 87% of investors surveyed believe that there is a significant shortfall in the supply of CEE private purpose-build student accommodation (PBSA), and around 74% are prepared to develop assets themselves.
This trend is already evident across the region, with eight private student residences in development including Golub GetHouse’s Livinn project (pictured), a modern student residence hall with 290 residential units in Krakow. Griffin Real Estate, who created Student Depot, a network of private rental dorms across Poznan, Lódz, Lublin and Wroclaw, has also signaled its intention to invest in more projects in Kraków and Wroclaw by 2021, increasing its number of beds to 2,700.
With international students as a proportion of the population growing at an average of 3.6% year-on-year across the region, the report suggests a renewal of student housing stock may be overdue in order to attract international as well as native students, the latter whose numbers have shrunk in recent years - in part due to financial stress.
'The present supply of PBSA in the core CEE-6 markets is currently limited to 20 assets. But with eight presently under construction across Warsaw, Krakow and Bucharest, development activity in the sector is growing - although arguably at a pace slower than needed, as investors begin to realise the sector’s potential,' concluded Wojciech Koczara, CEE head of real estate and Construction at CMS.
