The rising demand for global higher education continues to attract institutional capital to invest in European student accommodation with transactions up 29% year-on-year to some €13.6 bn across the continent in 2017, according to a new investment report from Cushman & Wakefield.
The report shows that Purpose Built Student Accommodation (PBSA) has moved out of the shadow of ‘alternative’ real estate, and is forming a key component of real estate investor allocations across the globe.
Coupled with the growing global demand for higher education, which is being driven by shifting demographics and wealth distribution, the report states that the sector is likely to thrive and diversify for the foreseeable future. As a result, competition and activity has amplified across European real estate markets, with investors seeking student accommodation investment across the risk spectrum and multiple geographies.
Data transparency across the continent remains in its infancy as the sector evolves, especially as many European countries also classify other micro-living concepts as student accommodation. Nonetheless, in the last 12 months, demand for exposure to European student accommodation has increased amongst global investors.
Fast-growing market
Among the fast-growing European markets highlighted in the report is Germany, which has the largest student population in Europe, and has seen student numbers grow substantially relative to other countries over the past 10 years. The positive demand story and stable investment environment has seen a large amount of international capital looking to invest in the sector, with Brookfield, GIC, Allianz, BVK and Harrison Street all entering the market over the past 18 months.
Another market which has seen significant growth is Spain, where some €600 mln of transactions were completed in 2017, driven by the sale of two large portfolios to new market entrants: GSA, and a consortium of AXA, CBRE GIP, and Greystar. Spain remains an attractive market in which to grow scale, driven by internationally recognised universities, increasing international student numbers and low accommodation provision rates.
Although portfolio deals in mainland Europe have so far been limited due to a lack of developed stock in the market, Cushman & Wakefield expects that 2018 will see increased development activity backed by institutional capital.
Paddy Allen, partner at Cushman & Wakefield, said: 'We now live in a world where the student population is more internationally mobile, more flexible and ultimately has more choice about what and how to study. The result is that customer demand for student accommodation shows no signs of abating any time soon.'
