‘Student housing frenzy’ in Spain

Student housing is the hottest sector in real estate in Spain as investors scramble to meet increasing demand, delegates heard at the Iberian Investment Briefing, organised by Iberian Property and Real Asset Media, which was held in London recently and hosted by the Spanish Embassy.

‘There is a big rush to invest in the sector in Spain,’ said Brian Welsh, CEO, The Nido Student. ‘The market fundamentals are very attractive and the PBSA versus residential yield spread is high’.

Demand is increasing because Spain is ‘the most popular destination for international students in the world,’ he said, with 42% coming from Europe, 35% from Latin America and 11% from Asia. The range of courses taught in English keeps increasing and the number of international and postgraduate students has doubled.  

‘Student housing is a really dynamic sector in Spain and demand is huge,’ said Audrey Klein, Managing Director International Institutional Clients, Corestate Capital Group. ‘You could call it a student housing frenzy’. 

Demand for student accommodation outstrips supply by 3 to 1, she said: ‘There is plenty of room to grow. I see a lot of runway ahead’.

Corestate, which is the biggest player in student housing in Germany, has now ‘moved aggressively on to Spain,’ Klein said. ‘It is not just international students, but domestic students as well. They traditionally used to live at home, but now they want to live together because co-living is a very strong trend’. 

Co-living and student housing are slightly different concepts, she explained, ‘but they are part of the same trend towards urban living and they are both driven by millennials’. 

You have to know your market, she said: ‘We did a survey of students in Spain and they expressed a preference for smaller rooms but bigger co-living areas and a swimming pool, while in Germany for example it’s the other way round’.

Each market is different and needs to be studied and understood, agreed Welsh: ‘Our original idea years ago was to apply the UK style model, then we realised we had to learn from the locals and adapt. In Spain, for example, catering is a must’.

The one thing that applies to all markets, including the Spanish one, is the need to listen to students, he said: ‘Brand building is key in a world of lifestyle seekers. Student housing is a highly intensive operational asset class. You have to build communities, promote positive well-being, educate and encourage sustainable living and use design & technology to enhance residents’ lives’.

Nido has launched an app because ‘physical and communicative tech integration is no longer just a nice to have, but it’s an absolute must’. 

Corestate opts for development over repositioning: ‘We prefer to do everything from the ground up, because it is very difficult to reconfigure existing space like offices to today’s students’ demands’, Klein said.

Construction costs are going up significantly largely due to higher labour costs, Welsh said. In order to offset them, ‘innovative design and modular construction will feature more heavily in future’. 

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