Student housing supply and demand in Europe

The development of the European student accommodation sector has gone hand in hand with the growth in international enrolment across the continent. As migration and international student numbers become hot topics in the UK and US, many European markets have recognised their importance as a tool to fuel domestic economic growth. Countries such as Germany, The Netherlands and Spain have instigated national internationalisation programmes and improved the marketing of their universities in concerted efforts to catch up with the UK and US.

International students, unfamiliar with local housing markets (and often with higher budgets), are an important demand base for many PBSA. This is particularly the case in many European cities (and especially those in southern Europe), where there is a greater tendency for domestic students to study in their hometown and live at home.

In most European markets, student numbers have been rising. Student numbers over the past five years have grown fastest in Denmark, up 22% from a relatively low base. Elsewhere in mainland Europe, Germany and Austria saw large growth in student numbers, both recording an 18% increase over the same period. Germany has witnessed significant growth in international students, and has already exceeded the government’s target of 350,000 international students by 2020. By contrast, the UK, Europe’s largest international student market, saw a slight decline in student numbers over five years, while international student numbers grew by 2%.

Europe’s most under-supplied cities

The provision of PBSA across Europe at the national level remains low. It 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%.

The national picture tells only part of the story. Analysing data from StudentMarketing, an independent research company focused on student housing asset class, we have identified some of Europe’s most undersupplied cities. Provision is lowest in Rome, a city with a student population of 220,500, but only 6,500 student beds (a provision rate of 3%). This is followed by Porto, where only 3.5% of the total student population has dedicated bed spaces.

Florence would appear to offer the best immediate prospects for delivering new supply, however, with a provision rate of 3.8%, high average PBSA single en-suite rents (€970 per month) and a student population of 62,400, of whom 23% are international. Investors should proceed with caution, with limited comparable product, high rents reflect the emerging nature of PBSA in Italian cities, a market not yet fully tested.

Spanish cities are also characterised be extremely low levels of supply set against high rents. Provision in Barcelona is just under 5%, Madrid stands at 5.7%. Vienna’s is another stand-out. A large student city with 186,000 students, 28% of its students are international, suggesting a solid demand base. PBSA provision stands at 10.3%.

What’s on offer?

Analysis of amenity provision across existing PBSA in 17 mainland European cities shows how limited the existing offer is (see chart). Utilities, as a basic service, are included in rent across the majority of markets (averaging 83%). A laundry room is the most common amenity provided, but a third of properties lack even this service. Study rooms feature in just under 40% of properties, bike storage in 37%, and car parking in 35%. Gyms are found in a quarter of PBSA in our sample cities.

This underscores the potential of the mainland European market. New providers and international players are bringing superior product, international expertise and operator economies of scale to these markets.

Cultural tendencies influence meal provision

Meals, included in rent, are commonplace in Spanish cities: 77% of properties in Seville offer inclusive meals in some form, 53% in Madrid, and 37% in Barcelona. The vast majority of these are on a full board basis. The same is true to a lesser extent in Italian cities, where between 20% and 25% offer inclusive meals. This is in contrast to PBSA in German, Swedish and Polish cities, where meals are not offered as part of rent.

This in part reflects national cultural tendencies (the importance of shared mealtimes to southern Europeans for example), and providers continue to reflect this in their product. But in response to a more international student base and changing habits, alternative approaches are rising.

On-site cafés and restaurants, open to all, allow students to eat on site but at times that suit them. The rise of online takeaway apps make it much easier for students to order in, so common spaces in which to eat become important. Communal kitchens, available to rent, give residents further flexibility when it comes to shared meals.