The European PBSA market is a land of opportunity

Online learning has kept the wheels turning, but from a student perspective it’s been a poor substitute for the in-person higher education experience and the opportunity to create real connections and shared experiences. The trend towards a sharing society and on-campus living is stronger than ever, tied to the unwavering student preference for face-to-face teaching and travel to the destination of choice. Yet student expectations in most European cities are not being met by the existing provision, which is often old, poor quality and provides little in the way of facilities and services that together provide this sought-after ‘living experience’.

We expect growth in international student numbers to gather pace over the coming decade in many European countries, driven by the rapidly increasing availability of English taught courses at those universities. Growing numbers of domestic students studying at higher education institutions other than their ‘home’ university are adding to the need.  The provision of purpose-built accommodation in these cities is already limited and in spite of a growing development pipeline, we’re not going to come close to meeting demand. It’s estimated by JLL that some 2.6 million more beds are needed in Europe’s main student centres based on existing student populations, never mind the fact that these numbers are growing and will push the shortfall even higher. The number of new international students in the Netherlands and Germany rose by 11% and 6% respectively in 2021 and with travel restrictions easing and a backlog of students who deferred courses now coming through, it’s clear there’s a significant gap.

In the Netherlands, international and mobile domestic students aside, there’s a strong trend for independent living from young adulthood with around half the Dutch student population living outside the parental home. Combined with a national housing shortage and rising rents, students are crying out for modern, dedicated housing at affordable prices. In Belgium, another market primed for growth and suffering a similar scarcity of PBSA, the main offering comprises ‘kots’, which are generally outdated and provide few shared amenities. Despite a significant volume of investment deals over the last couple of years, introducing superior product, international expertise and operator economies of scale, the Belgian PBSA market is still relatively immature with a student population expected to grow from approximately 475,000 today to 600,000 within the next ten years. Germany, home to a student population of almost 3 million, currently offers a more diverse choice of accommodation but much of it is in the hands of public sector institutions or the church, with a real scarcity of high-quality dedicated provision.

While the UK student housing sector has morphed from an alternative asset class to the mainstream in the space of a decade, the continental PBSA market has a long way to run. Institutional investment activity is only now really taking off, fuelled by portfolio and single property acquisitions and forward funding deals. But banks, lenders and institutional investors are listening – and they want to work with partners who can deliver future-proofed ESG assets and strong investment returns. With their support I believe the European student housing market will be unrecognisable ten years from now.

This article was first published in EG Magazine on 2^nd March 2022.