Bonard: Monitoring a €141bn purpose-built student housing market

The estimated market value of all private portfolios monitored by student housing data and research firm Bonard across Europe reached €141.4bn in 2023, an increase of 10% over 2022. The number of portfolios of privately held and operational purpose-built student accommodation (PBSA) with two or more assets under management has been rising in the past two years. In 2023, 331 PBSA brands were active in the market – 46 more than in 2022. 

The UK is more mature than continental Europe and its situation is “stabilising”, with 65% of the total offer dominated by brands with large portfolios (more than 10,000 beds). Continental Europe is following the UK’s example of market consolidation, with big players expanding their portfolios significantly. In 2023, brands with over 10,000 beds collectively recorded a 74% growth, adding 52,674 beds to their stock. 

According to Bonard’s recent report, this is a “promising sign”, suggesting a “fertile environment for brands to develop and grow despite the challenging economic climate”.

That climate certainly had an effect on transaction volumes, which fell from €7.7bn in 2022 to €1.7bn in 2023 in the UK, and from €4.7bn to €1.2bn in continental Europe. Those numbers also illustrate the preponderance of the UK market, as do the statistics for the number of beds (see table), which show the potential for growth in southern European markets.

The report finds that yields have trended upward during the past year. Yields in London are estimated at 4.25%, while in some developing cities they are much higher, particularly in southern and eastern Europe. In Seville, they are at 5%, Prague 5%, Lisbon 5.25%, Valencia 5.5%, and Warsaw 6%.

In all markets, student-housing yields are comfortably above those of other real estate sectors, apart from in London where its 4.25% is equal to the yield on residential. In Warsaw, its 6% figure compares with 5.5% for residential and 4.9% for offices.

In 2023, significant rent increases were observed. The established UK market recorded a remarkable 12.9% rent increase on average. This is because the supply-demand situation is acute in several markets. 

In Bonard’s student-to-bed-ratio analysis, again many Southern European cities have a severe shortage – including Rome, Madrid, Porto, Barcelona, Milan, Bologna, Florence, Padua, Pisa, Turin and Valencia. While the most well-supplied markets include several in the UK – Cambridge, Leeds, Manchester and York – and two in Denmark – Aalborg and Aarhus.

The number of international students rose in most markets (with the exception of Denmark), with the strongest growth seen in Eastern Europe – nearly 20% in Poland, and close to 30% in Slovakia. The movement in the overall number of students was varied. It remains positive in the UK market, but there were big falls in Denmark.

Bonard records 343,884 beds in the development pipeline across 1,178 buildings. Of these, 34% (117,772 beds) were under construction. The remaining 66% of beds were still in the planning stage, with or without a building permit. Two cities, Manchester and Porto stand out as showing the most significant growth in the number of beds in the pipeline. 

Out of 120 investors, operators, developers, banks, and other players in the sector interviewed between November 2023 and January 2024, 98.6% expected to invest the same or more in student housing than last year. More than 60% said they planned to invest over 11% more, while 30% said they would spend “considerably more”. Only 1.4% said investments would “stagnate or be moderate”.