Why student housing investment
still makes the grade

Strong appetite for purpose-built student accommodation across EMEA region

February 27, 2023

Student housing scored top marks for real estate investors in 2022. Looking ahead, purpose-built student accommodation (PBSA) looks set to remain top of the class.

While investment volumes fell sharply across most sectors in the second half of last year, PBSA posted a record year, with €11.6 billion deployed across the EMEA region, according to JLL data. One of Europe’s largest real estate deals saw £3.3 billion (€3.8 billion) paid for the UK-based 26,000-bed Student Roost platform by Greystar and GIC.

“The UK is the largest PBSA market in Europe, but investment appetite is growing for student housing all across the continent,” says Nick Whitten, head of EMEA and UK Living and residential research, at JLL.

The student housing sector across Europe offers “a variety of opportunities”, says James Brant, commercial director at CRM Students.

“From established markets in the UK to emerging markets in Italy and Poland, there’s huge potential to build a continental portfolio combining first mover advantage in some countries, and proven established revenue streams in others.”

Here are five key reasons driving the heightened interest for student housing.

1. Demand vs supply imbalance

There are more than 20 million full-time students across the UK and the EU, according to JLL estimates. But almost all countries across Europe have a national shortfall in supply. There are at least seven students for every available university or private sector student bed across Europe, forcing 11 million students to rely on the private rented sector. A further 6 million European students opt to remain at their family home while studying.
“With student numbers rising, the unmet demand is likely to grow – as construction inflation remains elevated, limiting the potential for additional new supply,” says Julia Martin, EMEA head of Student Housing at JLL.
“This demand-supply imbalance is forcing more students to compete for homes in the already oversubscribed wider private rented sector. This pressure is being felt in housing markets in many major European cities.”
For most European countries, the growth in student demand continues to outpace the supply of available beds, says Philip Wedge-Bernal, vice president, European research at Harrison Street. “This should create a highly competitive environment that translates into strong rental growth.”

2. Investment fundamentals

Strong rental growth, having reached a five-year high in 2022, continues to catch investor attention, according to JLL.
“This strong rental growth is expected to continue because of the fundamental demand-supply imbalance,” Whitten says. “At the same time, EMEA student accommodation continues to boast an attractive return profile”, he adds, pointing to “extremely high occupancy rates” and JLL’s prime European yield indices showing between a 25 and 100 basis point advantage when compared with most other real estate. The higher yield and occupancy rates have made the sector more favourable for securing debt – banks have made it clear they are open for business on student housing.


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3. International appeal

According to The Times Higher Education World University Rankings for 2023, Europe is now home to the highest number of the world’s top 100 universities, ahead of the U.S.
“International student growth in Europe continues to consistently rise. Part of the growing appeal is the spread of English language degrees across the region,” says Whitten. Outside of the UK and Ireland, there were only 50 English-language undergraduate courses in Europe back in 2009.
“Today, there are more than 3,000. But studying in Europe is also about culture and lifestyle,” he adds.
Non-European citizens studying within the Schengen Area of 26 European states can obtain a student visa allowing them to easily visit the other Schengen countries.

4. Government support

European governments’ support of a strong education sector also underpins the need for good quality student accommodation, Whitten says.
“Some European countries still offer very supportive grants for students to go and study with tuition fees at many public universities in Europe, being low or free for both domestic and overseas students.”
Equally, many nations also have grants or low-cost loans to help students towards funding their living costs, he adds.

5. Counter-cyclical success story

As was the case in the 2008 global financial crisis and once again during the Covid-19 pandemic and subsequent economic turbulence, PBSA offers defensive qualities during downturns, Whitten says.
“Student numbers have historically proved to be resilient or even grow during economic downturns, further increasing demand. And this is proving to be the case once again, with operators reporting strong leasing cycles for the current academic year.”
The student housing sector has proven to be counter-cyclical during previous downturns, says Nigel Allsopp, senior director for investment strategy and research at Greystar. “It continues to offer attractive returns, given current yields and prospective growth.”

With macro-economic pressures appearing to cool, investor interest remains.
“The next few months could hold the answer as to whether 2023 is another grade-A year for PBSA,” Whitten concludes.

Contact Julia Martin

Head of Student Housing, Capital Markets, EMEA

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