Rewind 10 years and the picture across Iberia was a very gloomy one compared with today. High youth unemployment, unstable GDP growth and soaring levels of debt were widespread, with the real estate industry suffering at the mercy of a wider economic crisis.

The picture in 2020 is drastically different. Commercial real estate has been riding high on a wave of resurgence and both Spain and Portugal’s markets have, in equal measures, seen a return to their former glory; none more so than in the student accommodation sector. Investment volumes in Spain and Portugal have reached €400 million and €500 miilion respectively as both countries carve their names on the global higher education stage.

The investment thesis behind these markets has been supported by student growth. In Spain alone, the number of students enrolled in campus-based universities has increased by 8.29 per cent in the space of a decade – nearly 9 per cent (8.76 per cent) of whom are international students. In Portugal the percentage of international students is even higher, standing at 15 per cent in the 2018-2019 academic year.

Fundamentals first

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.

Social mobility = high quality

Alongside the 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. Student accommodation providers have been keen to deliver units which suit cultural preferences, erring towards privacy with everything being self-contained. With students paying more in tuition fees, they are demanding more from their entire university experience.

Opportunities everywhere

So what’s next? It’s clear that both Spain and Portugal have established the fundamentals of their student accommodation but the opportunity for investors and developers is widespread. 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.

As a result, 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 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.

Further information

Read more: Global Living