Investment in residential alternatives of all types is rising, with big-ticket global residential investment volumes at $223 bn (€192 bn) exceeding all global retail or industrial investment in the last year, according to new research from Savills.
Global student housing investment volumes in particular have risen 87% in the last five years, according to the broker's Global Living report.
The maturity of the UK and US markets, coupled with low provision yet high demand for purpose-built student accommodation (PBSA), mean that southern European cities offer the strongest opportunities for new investment in the sector over the coming year. But global need for multi-family, co-living and retirement housing offers opportunities across all jurisdictions, and are particularly under-invested asset classes in the UK.
The provision of PBSA is highest in the UK where 27% of all students can be accommodated, and lowest in southern Europe. In Italy, Europe’s fourth-largest student market, the national provision rate is less than 5%. Analysing city-by-city data from StudentMarketing - an independent provider of student housing and micro living research and data - Savills has identified that provision is lowest in Rome, with a student population of 220,500, but only 6,500 student beds (a provision rate of 3%), followed by Porto (3.5%), Florence (3.8%), Barcelona (4.9%) and Madrid (5.7%). These cities therefore offer the best immediate opportunities for investors, as many have strong international student populations - indicating a solid supply base - and high average PBSA rents.
'Italy’s proving to be an attractive market for investors where supply is low and the existing quality of accommodation is dated,' said Marcus Roberts, director of residential capital markets Europe at Savills. 'Demand is strong, but limited comparable product reflects the emerging nature of PBSA, and the market is not yet fully tested. Spanish and some Portuguese cities are also characterised by extremely low levels of supply against high demand and strong rental growth. We’re seeing private equity investors particularly active at the moment in the Iberian market – in fact Spain has seen record investment volumes in PBSA in the past 12 months.'
PBSA saw another record year in 2017, with $17.5 bn invested globally, up 4% from $16.9 bn in 2016. The UK and Western Europe accounted for over half of this investment (51%, $8.9 bn), a 35% increase from the $6.6 bn invested in 2016. The UK, Germany and Spain were the most active single country PBSA markets in Europe.
