How should we be evaluating European Student Accommodation in today's market?

Cushman & Wakefield's latest European Student Accommodation Guide highlights the continued momentum of Purpose-Built Student Accommodation (PBSA), coming out of the shadows of real estate ‘alternatives’ to a now globally accepted mainstream asset class, despite a backdrop of political uncertainty and concerns about global economic cycles reaching a peak.

The global supply and demand dynamics underpinning the sector are long term and resilient. These are driven by increasing urbanisation, rising levels of social and global mobility, as well as a growing appetite for higher education, driven in part by the continued rise of the middle classes across regions such as India, Asia and western Africa.

Higher education is becoming increasingly more internationalised and more competitive around the globe. Educational institutions are progressively becoming more commercialised on an international scale with students have increasing choice in terms of destination, cost, and method of study.

Not only are the asset class and educational institutions progressing, but the target customer is becoming increasingly complex and demanding. In order to obtain a competitive edge, investors need focus on the customer requirements in addition to the basic real estate fundaments in order to drive rents. If customers demand and see value in all-in-one rental payments, superfast connectivity, and first-class amenities, like a gym, library, and cinema room, then there is an appropriate market price for this.

At the forefront of the tech savvy and mobile millennials requirements is student well-being. So much so, that half of all students in a study undertaken by Insight Network reported thoughts of self-harm. This is an issue that requires a collaborative approach from investors, developers, operators and educational institutions in order to improve the spiritual, mental, cultural, social, environmental, physical, academic, financial and career wellbeing.

The European student housing investment landscape remained robust in 2018, however in the absence of no significant portfolio deals throughout mainland Europe due to traded platforms now owned by long term capital, transactions were focussed on development land.

At a country level, Ireland and The Netherlands saw an increase in transactional activity by over 50%, reflecting the more mature nature of these markets, however other markets such as Spain and Germany saw a decrease.

We expect 2020 will see continued development activity backed by increasingly diverse capital sources. As many assets under development approach completion, investors and operators alike will be watching these assets carefully to evaluate their success and how they validate underwriting assumptions moving forward.

Please get in touch if you'd like to discuss more.