Record breaking year for investment in student housing across Europe
Across Europe, student housing is the only real estate asset class where investment volumes were up in both Q4 2022 and full-year 2022.
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Investor demand for student housing across Europe continued at pace in 2022 with a record £13.1 billion deployed across approximately 270 transactions.
GIC and Greystar’s £3.3 billion acquisition of the UK based Student Roost portfolio in the fourth quarter undeniably bolstered total volumes. However, even when stripping out the portfolio sale, investment volumes in 2022 were still up by an impressive 40% when compared with the year previous.
Record-breaking levels of investment illustrate the continuation of the thematic shift of investor appetite towards beds across Europe. Despite the economic uncertainty that unfolded last year, many investors found confidence in the counter-cyclical nature of the student housing market and chose to invest in an asset class backed by strong fundamentals.
Growing student age populations and an increase in international student numbers have supported strong enrolment figures across the continent which, in turn, has fed through to high occupancy levels and rental growth.
When breaking down these demographic drivers in the UK, we find that there is a healthy correlation between the number of students studying in a city and the level of institutional capital invested in student bedspaces.
For example, large student cities such as Birmingham and Nottingham recorded robust levels of investment in 2022. A similar analysis conducted by Real Capital Analytics (RCA) suggests that across Europe, this relationship is not as strong as witnessed in the UK and statistically offers a lower level of correlation.
When holding all other variables constant, cities such as Barcelona and Madrid with large numbers of students pose an opportunity for investors to deploy funds and institutionalise student housing.
Strong student numbers are not the only factor driving investment into purpose-built student accommodation (PBSA), student sentiment is also shifting.
Our latest UK student survey , undertaken in partnership with UCAS, demonstrates that PBSA is delivering higher levels of satisfaction and better value for money than alternative accommodation in the wider private rented sector.
Historically, there has been a perception that PBSA is more expensive relative to this, however, considering rent and utility cost inflation, more students are opting for the fixed cost model of professionally managed PBSA as they seek to maximise value for money.
Accommodating the shift towards more students wanting to live in PBSA, coupled with favourable demographic trends, will underpin further investment into the sector not only in the UK but across Europe also.
Photo by Mimi Thian on Unsplash