The rising number of students across Europe has outstripped supply of purpose-built student accommodation (PBSA), resulting in a current shortage of 3 million beds. This undersupply is set to worsen by an additional 200,000 beds over the next five years, according to new research by advisor JLL.
The current European private PBSA supply of 0.8 million would need to grow four times to meet the demand. That core unmet demand represents a €450 bn investment opportunity, 34 times higher than the record 2022 European investment.
Some 40% of the European unmet demand - 1.2 million beds - is concentrated in the top 40 student cities. This is forecast to grow by a further 8% during the same period despite a pipeline of over 130,000 beds as the continent’s universities continue growing numbers of both domestic and international students.
JLL’s European PBSA: Investing in the Future report identifies London, Paris and Barcelona as the top-ranking investment hotspots due to the high student growth, international appeal and quality of education, PBSA operational performance, as well as costs and affordability of competing private rented sector.
Over the past decade, the number of students in the EU and the UK has grown by 15% reaching an estimated 21.7 million in 2022/23. JLL forecasts that it will grow by a further 10% by 2030/31. This means an additional 2m students in need of housing solutions compared to 2022/23.
There are only 2.2m PBSA beds across key European markets, out of which only 40% are funded by private institutional investors. The other 60% is publicly owned or subsidised and often offer only limited access to international students and domestic students who do not fulfil specific socio-economic criteria. However, almost half of the additional students over the past decade were internationals, making them the fastest-growing group.
While investment into European PBSA has seen strong growth with 2008-2022 CAGR of 27%, it primarily targeted the UK. Key markets in continental Europe would need to grow, on average, 13 times to match the UK 2018-2022 average. The largest student markets like Germany and France could see their investment grow from an average of €0.5 bn to €7 bn necessary to meet unmet demand. In more nascent markets like Italy, at the current pace of investment it would take over 100 years to deploy the necessary investment.
Dominika Mocova, senior analyst, JLL EMEA Living and Research Strategy commented, 'Forward investment will drive the sector’s growth due to the lack of existing trading PBSA stock in continental Europe, in particular. We have started seeing this trend in the past couple of years despite rising construction costs with investors and developers becoming more creative to hedge higher costs. However, greater market transparency and understanding from planning authorities is necessary to unlock the full potential.'
Julia Martin, head of EMEA Student Housing at JLL, Capital Markets added, 'With developers now having a better grasp of the cultural nuances and design requirements through the different European countries, they are set to introduce the next generation of fit-for-purpose schemes, aimed at addressing the growing demographic student population as well as rising international student demand for quality accommodation across Europe. The continent is now home to the highest number of globally ranked universities, with 203 universities in the top 500 according to the 2024 QS World University Ranking. Given the current shortage of student accommodation in key cities and the vast untapped potential in countries such as Italy and Germany, addressing the standing imbalance between supply and demand will unlock a huge €450 bn growth opportunity in the market, with PBSA playing a crucial role.'
