European Student Housing 2022 - what does Savills say

Savills recently released a report on the status of the #studenthousing sector. As I know you are quite busy, I summed it up for you.

Demographic overview

Demographic trends indicate a rising #student population in major European cities, with an average forecasted growth of 5.8% over the next five years ?? Southern Europe and Ireland are expected to see the steepest growth: cities with the highest share of young population include Copenhagen, Manchester, London, and Dublin.

This presents opportunities for student #housing expansion in cities with multiple #university options!

Enrollments

Student numbers in Europe showed overall growth in the last academic year (2021-2022), although at a lower rate compared to the previous year due to the impact of the pandemic. #International student numbers also increased across Europe, particularly in the Netherlands and Spain.

The availability of English-taught courses and favorable exchange rates are expected to continue attracting domestic and international students to Europe for higher education.

Demand

Demand for student housing is expected to rise due to increasing enrollment, particularly international students with higher budgets. Current average occupancy rates across Europe are high, ranging from 95% to 98%.

The provision rate of is slightly down from last year, indicating supply shortage. Supply and demand imbalance may continue to put upward pressure on prime student housing rents in the coming years.

Also, rising energy prices may lead to utilities being charged directly to students in some countries: landlords may consider rental increases cautiously due to students' limited ability to absorb higher costs.

In general rent costs as a percentage of average household income have increased, potentially posing challenges for student households who depend on parental income for support.

Investment market

The student housinf market has been robust and attractive to investors. The investment volumes in the sector have been consistently high, with a total investment volume of €11.7 billion in the first three quarters of 2022, a significant increase of 130% compared to the same period in 2021 and a record high.

Forward-funding deals, where investors fund the development of new properties, have been gaining traction, accounting for 30% of the total investment volume in 2022. This trend is particularly prominent in countries with developing PBSA markets and limited available stock.

However, forward-funding deals are not without risks, such as build cost inflation and rising material costs, which may impact investment activity in the short term.

There is also a growing awareness and commitment to environmental, social, and governance (ESG) standards in the PBSA sector. Investors are increasingly focused on sustainability and positive social impacts, with some projects aiming to achieve certifications such as LEED Gold and BREEAM ratings. This commitment to ESG principles is expected to future-proof the sector and make it more attractive to investors and environmentally-conscious students.

Conclusions

In conclusion, the student housing sector showed positive growth in total investment volume in 2022, making it a viable investment opportunity for investors looking to balance their portfolios.

Despite challenges such as rising build costs and energy prices, the sector remains resilient due to strong demand from young people entering higher education during challenging economic periods.

The shortage of high-quality stock may insulate the values of existing assets, offsetting potential slowdown in new building completions.

The fundamental drivers for investment in the European PBSA sector, including growing student populations, strong enrolment in higher education, and demand for high-quality student accommodation, remain strong.