Investment in purpose-built student accommodation (PBSA) has surged globally in the last five years, but with some markets now relatively mature, what are the best opportunities for investors in the sector over the next 18 months? 

In terms of geographies, provision of PBSA is currently lowest in southern Europe. Analysing city-by-city data from StudentMarketing we’ve found that Rome has a student population of 220,500, but only 6,500 student beds (a provision rate of just 3 per cent), followed by Porto (3.5 per cent), Florence (3.8 per cent), Barcelona (4.9 per cent) and Madrid (5.7 per cent).

These cities have strong demand for PBSA from large international student populations and high average rents, but often what limited accommodation is available is dated and doesn’t live up to students’ expectations. These locations, albeit currently largely untested, therefore offer good opportunities for new providers and international players to bring superior product, international expertise and operator economies of scale to the market.

In countries where PBSA provision and standards are generally higher, such as the UK, the Netherlands and the Nordics, there are still gaps in the type of product available. A previous focus on the top end of the market, with luxury rooms and extensive amenities, has often left an opening for a more mid-market and value units to appeal to cost-conscious students. While perhaps not offering such strong rental returns as those at the top end of the market, the promise of regular income still makes these assets attractive to investors.  

PBSA providers with a proven track record and strong brand recognition are also now extending into the co-living sector in locations where they’re already established, which opens up opportunities for investors looking to spread risk across several different asset types.

Operators have been quick to realise that the students who lived in their schemes while they were studying have struggled to find accommodation of the same standard in over-stretched residential markers post-graduation. Targeted at graduates and young professionals, as well as students, some of these operators have now launched co-living brands, extending the convenience and amenity of PBSA to young professionals via fully furnished units, extensive facilities, community events, all-inclusive bills and pro-active management. 

For investors, the advantage is a diversified tenant base, not solely reliant on students and the success of the local higher education market. Just as co-working has become established in the office sector in response to occupier demand, co-living is emerging to meet residential occupier demand.

Student housing has shown how a specialist property investment can become part of the mainstream and the market is now responding to under-served occupier groups by offering new and hybrid models that challenge conventional asset classes. Investors, capitalising on the secure income streams they offer, will continue to drive their growth.

Further information

Read more: Spotlight: Global Living