The provision of, and investment in, accommodation for students in the UK has been a successful growth sector over the past decade or so. It has even shown how residential property can perform as a ‘commercial’ investment if purpose-built, for letting.

UK and other global investors are now becoming more sophisticated as they look for ways to identify supply gaps and focus on institutions and cities that are likely to see highest demand, have the most constrained supply and show the best returns.

As the student housing investment market matures, the more sophisticated players are looking for new products in which to invest. Some of them are looking overseas to see if the models that they have pursued successfully in the US and the UK can be replicated elsewhere in the world or adapted to suit the most promising overseas markets.

This report focuses on Europe as a potential location for such activity. It shows how cultural, economic and market differences mean that returns on student accommodation will not be the same everywhere and some markets will be difficult to penetrate successfully.

We have examined the state of the student housing markets in the 119 European cities that are home to Europe’s top tier of universities. Our assessment of investment risk looks at the quality of different institutions in each city and hence their capability to attract visiting students (most likely to require accommodation) and their capability to grow. This risk measure also assesses the cost of living in a city and fee levels which are likely to affect future demand from students. This is set against the market strength indicators of rent levels and the supply of bespoke accommodation per student to give a rich picture of potential investability by city, across Europe.

Our findings indicate that investment choices must not be made at a national level. Investor focus needs to be concentrated on cities themselves and their higher education institutions in particular. Different locations can have very different prospects within the same country.

In Italy, for example, higher rents, lower supply and a large market makes Milan an interesting location for investor investigation but Modena, for example, with more supply per student, higher risk and a much smaller market, a less attractive proposition.

Compared at the pan-European level, we paint a picture of small and riskier markets, dominated by local and domestic students, with adequate supply that are unlikely to appeal to risk-averse international investors, except in exceptional circumstances. On the other hand, there is a sizeable ‘investor sweet spot’, which includes a variety of cities with low supply, strong demand and potentially higher rental returns.

It has to be said that many locations in this sweet spot are in the UK but this is not to suggest that there are no opportunities for diversification elsewhere in Europe, especially if land and build costs are to be taken into account. Our country by country guides illustrate where these might be.

Taken from
Spotlight: European Student Housing