Investment in the Spanish student housing sector has been increasing rapidly in recent years, as investors and developers see opportunities driven by the demand-supply imbalance.
The large student population, increasing mobility among Spanish students and the growing number of international students are fuelling demand for student accommodation.
The number of students enrolled in the the country's university system increased by 3.3% in the 2020-2021 academic year to 1,679,518 students, 9.4% of whom were international students. Spain’s popularity among international students is increasing thanks to its tourism appeal, its wide range of quality universities and business schools, the rise of English-taught programmes, the success of the Erasmus programme and the market connection with Latin America. The number of international students has increased by 55% from 2016 to 2021.
Student growth is expected to gather pace over the coming years in the major Spanish student cities as the number of young people aged 20-29 is set to increase significantly, at a higher rate than in other major European cities, according to Oxford Economics' forecast.
Student accommodation supply in Spain is scarce and mostly obsolete. Principal Global Investor estimates a structural shortage of over 350,000 student beds in Spain. The purpose-built student accommodation market has, therefore, attracted investors, mostly international, over the past few years. Most of the capital has been allocated to land and developments in Madrid and Barcelona, but the lack of land in good locations and the demand in secondary student cities has led investors to tap into other locations such as Seville, Valencia, Pamplona, Málaga and Granada.
The joint venture Greystar, AXA IM & CBRE IM is leading the sector. In 2017, the joint venture acquired the Resa platform with 37 assets and 9,400 beds. In 2020 it acquired four additional assets with 1,100 beds, expanding the portfolio to over 11,000 beds across 20 Spanish cities. According to the Expansión newspaper, the Resa platform is for sale, a deal which could exceed €800 million.
New joint ventures have been formed over the past two years which are boosting investment.
In 2021, EQT Exeter and Grupo Moraval formed a €500 million joint venture, which has secured two initial sites in Seville and Málaga comprising approximately 1,500 beds and which is actively working on a strong pipeline.
Also in 2021, TPG Real Estate Partners partnered with Urbania, a privately-owned real estate company to acquire three purpose-built student accommodations with a total of 1,000 beds located in Madrid, Salamanca, and Pamplona, which will operate under the BCOME brand.
Foreign investment continues in 2022. Xior Student Housing, the Belgian REIT, with a portfolio over 2,800 units across sixth Spanish cities, acquired its second residence in Granada early this year with an investment of around €26 million. The residence is expected to be delivered in 2025.
By the end of 2022, the student housing supply is expected to increase by 14,000 beds to reach 111,000 beds in Spain, according to data provider Sectorial Observatory DBK.
Despite the strong development pipeline across many Spanish cities, supply is still not enough to meet the pent-up demand. Investor appetite remains and investment is reactivating after the pandemic, which has affected all sectors. An increase in operating assets transactions is expected for the coming years, as the pipeline of student residences develops and the market consolidates. New quality products are likely to attract more core capital into the market which will lead yields to tighten further.