This is a result of international investors identifying the lack of quality product as an opportunity and increasing their allocation of funds in these market segments. The investment thesis behind these markets has also been supported by student growth. In Spain alone, the number of students enrolled in campus-based universities has increased by 8.29% (2008-2009 compared to 2018-2019) – nearly 9% (8.76%) of which are international students. In Portugal the percentage of international students is even higher, standing at 15% in the 2018-2019 academic year.
Dan Moses, Graduate Surveyor in the Operational Capital Markets team, Savills, explains:
“There are many reasons behind the popularity of Spain for international students. As well as the renowned tourism appeal, the rise in English-taught programmes (ETPs) offered by higher education providers, coupled with the successes of the Erasmus programme, have promoted Spanish universities in the minds of the international student community. Eight universities in Spain are now among the 300 best institutions in the world and Portugal’s higher education system was ranked 35th globally in 2019, according to the QS World University Ranking. Spain is also the preferred location for the European Commission’s Erasmus student programme; a leadership position which it has held for almost 20 years.
“Alongside the dazzling quality of education in both these countries, we must also note the effect of a more socially mobile generation of students who are more likely to move away from their home country in order to experience life in another city. This is likely another reason for increased levels of investment into the student accommodation sector, as students come to expect a higher standard of accommodation compared to a decade ago. Providers have been keen to deliver units which suit cultural preferences, which err towards privacy and everything being self-contained. With students paying more in tuition fees, they are demanding more from their entire university experience.”
Spain and Portugal have established the fundamentals of their student accommodation sectors but the opportunity for investors and developers is widespread, says Savills. The potential is still enormous thanks to three core factors; the high unmet demand, the increase in the number of students and the increase in rent prices in the housing market in recent years. In Portugal alone, the discrepancy between the number of students versus the number of beds means that only 14% of students have guaranteed accommodation.
Dan Moses added:
“We expect investment volumes to increase and yields to sharpen as investor appetite increases. Deals such XIOR’s acquisition of the U-Hub platform in Portugal, and Invesco’s joint venture with local developer Urbania, attest to the variety of capital entering the market and support the narrative that Spain continues to attract international money despite yield compression. The outlook for the Iberian student housing market is certainly a sunny one.”