PBSA Investment Market Outlook, UK & Europe, issue 6 2022
Media s u MM ary
PBSA Investment Market Outlook, UK & Europe, issue 6 2022
Media s u MM ary
This is the sixth edition of House View, a series of purposebuilt student accommodation (PBSA) investment papers, reflecting the fast-paced changing environment in which Nido are developing and operating PBSA across Europe.
Here we take an in-depth look at key themes driving the PBSA sector that are particularly important from an operations perspective, directly translating to key considerations from investors going forward.
This House View also looks towards the future for all stakeholders involved in PBSA, drawing on Nido’s operational expertise and insight of the PBSA market gained through Nido’s successful UK, Ireland, Spanish, Portuguese, Danish and Germany operations and ongoing pan-European expansion.
The PBSA sector has seen a record year for investment across the UK, Ireland and continental Europe, with €9.5 billion set to be committed over 2022. Several markets have seen their largest PBSA deals to date.
Europe remains a leading destination for international students from around the globe, causing shifts in global trends. In July 2022, figures from UCAS showed more applications (to study in England) from China than from Wales, Northern Ireland or the European Union, while applications from India have grown by 11% year-on-year to 8,660 applicants.
Student populations are forecast to continue to rise, due to socioeconomic changes and a growing demographic cohort eligible to attend universities and colleges. The Netherlands saw the highest growth in student numbers, increasing (6.4%), with an 11% increase in applications from international students.
Student accommodation across Europe is in perennially short supply, with high undersupply rates across key markets. PBSA will need to be built at scale across Europe to meet the increasing demand due to demographic shifts.
European PBSA operators have been at the centre of the continued rollout of ‘coliving’ within purpose-built rental accommodation due to the structural similarities of having private living quarters with communal living spaces.
As countries across Europe continue to grapple with low housing stock and increasing demand for accommodation, the need for freeing up homes to meet this demand is causing policy-makers to see theimportant contribution that PBSA development across the continent can make.
Providing purpose-built student accommodation sets students up with an ideal environment to flourish at university and eases pressure on rental housing stocks which can then become available for local people.
Despite huge consumer demand and the increased investment we have seen into the PBSA sector, the current economic backdrop is heading towards another challenging time. With an energy crisis, potential recession, inflation at record highs - how will these not effect this resilient asset class?
Ireland has seen double-digit growth from EU-27 countries, as students from the EU-27 are attracted to Ireland’s accessibility, due to similar passports, fees and links to the Erasmus+ scheme, unlike the high fees and visa-related barriers EU students face in the UK post-Brexit.
According to UCAS, 40% fewer EU students applied to UK universities through UCAS in 2021 than in 2020. From the start of the 2021-22 academic year European students are not able to claim prior home-fee status. This means studying in the UK can now cost students from Europe up to £40,000 per year, driving down EU enrolment numbers. Despite this, applications from non-EU international students and an increase in domestic students are making up for the shortfalls.
The provision of PBSA in the Portuguese market remains the lowest in Europe, with Lisbon and Porto seeing just over 2% and 4% of their students catered for.
Despite international student growth in Denmark falling by 3.6% during the pandemic, annual student number growth including domestic students more than tripled to 2.3%.
OPERATIONAL RESIDENCES COMING SOON 2023
In June 2022, it was reported by Times Higher Education that high international demand for student places has dramatically outstripped the available supply of housing, with Dutch universities asking international students without accommodation not to enrol in courses.
Over the last 18 months, despite a demographic dip in the size of Germany’s youth population, and a fourfold decrease in international student growth, the average annual student growth numbers have doubled during the pandemic, demonstrating the strong (often domestic) demand for purpose-built student accommodation.
Student housing yields in Spain have remained some of the highest in Europe over the last two years, with Seville, Malaga and Valencia all remaining above 5.25%. This is partly due to the out-of-term repurposing of PBSA assets as holiday rental beds, an increasingly common trend among Iberian offerings, due to their great amenities and locations, with some offering rooftop gardens and swimming pools.
“Aftertwoyearsofnewandunusualchallenges,wehaveseen the PBSA market come back to stability. Internationally, the PBSA market is booming. As well as seeing a record year of investment in the sector across the UK and Europe, we have seendemandforstudentaccommodationgrowingtobeyond pre-pandemic levels.”
“Both continental Europe and the UK saw their biggest PBSA deals to date this year. Scandinavia and the Nordic countries sawsignificantincreasesininvestmentintheirPSBAmarkets. More and more, we have seen institutional investors and local institutionsrecognisethevalueofPBSAandinvestinanasset classfromwhichtheygetaconsistentyield.Asrentalmarkets around the world tightened and became more unaffordable, PBSA presents itself as a fiscally responsible solution to the housing crisis.”
“As we began to look beyond the pandemic, the demand for co-livinginEuropegrew.Wehaveseentheuptakeofco-livingled PBSA grow in popularity not just with Europe’s increasing number of students, but also with young professionals. Amid the housing and affordability crises, PBSA is viewed by policy makersasasolidoptionthatwilleasethepressureonhousing supply.Nido’sprojectpipelinefor2022isverystrong,andwith the post-Brexit implications on the student housing market beginning to settle, the demand for PBSA is only increasing.”
Nido Student (“Nido”) is an award-winning international student accommodation operator. Attracting students from more than 100 different countries across 150+ institutions.
Its reputation as an insights-driven and customer-focused business has led to a seamless pan-European expansion in the past two years. This growth includes 5,400+ beds delivered in 2022 across Denmark, Ireland, Portugal and Spain and will continue into 2023 with a strong pipeline already secured.
With over a decade of experience and a firm focus on wellbeing and resident experience, Nido is the global operator of choice for both students and investors.
Further information on Nido is available at: www.nidoliving.com
Round Hill Capital is a leading vertically integrated real estate investment manager, specialising in innovative accommodation solutions. We have built an international reputation for working with world class partners and an exceptional track record of delivering results while safeguarding capital.
Founded in 2002 by CEO Michael Bickford, Round Hill Capital has been building long-term social, sustainable, and financial value for over 20 years. By working with our partners and local governments we focus on creating quality, affordable and sustainable housing - allowing us to make a positive impact in the communities we invest in, while also providing outstanding risk adjusted returns for our partners.
Being the investment, asset, development, and property manager is what makes us unique and ensures we are one of the most successful real estate investors globally - managing over $13B in capital and over 140,000 residential units and student housing beds to date.
For further information on Round Hill Capital visit: www.roundhillcapital.com.
This House View is being provided solely for informational purposes to the Recipient and its client(s) and is strictly confidential. This House View does not constitute investment advice and should not be relied upon as such. This House View must not be copied, reproduced, distributed or passed, in whole or in part, to any other person. This House View is not intended for distribution to, or use by any person or entity in any jurisdiction where such distribution or use would be contrary to local law or regulation. This House View should not be used for any other purpose or shown to any other parties apart from the Recipient and its client(s). No representation or warranty, expressed or implied, is or will be made and no responsibility or liability is or will be accepted by Nido Student, Round Hill Capital or any of its respective officers, servants or agents or affiliates as to, or in relation to, the fairness, accuracy or completeness of this House View or the information forming the basis of this disclaimer.