Set against growing demand for higher education, the provision of purpose-built student housing, even in mature markets, remains comparatively low. While open market housing has filled the gap in many locations, students are coming to expect ever higher standards of accommodation.
For a globally mobile student population, secure, well managed, quality accommodation from a trusted provider has strong appeal to those unfamiliar with local housing markets. The PBSH sector has begun to make inroads into meeting that demand, focusing on the premium market.
The optimum ratio for accommodation varies not only by country, but also by town or city. It depends on the characteristics of the local market including the demographic profile of the students, the provision of university residences, and the size and strength of supply and wider demand in the private rented sector.
In the UK, the sector now houses 32% of full-time students (or 24% of all students) in over 550,000 purpose built beds, but supply in many cities is still failing to meet demand, so further opportunities exist. In fast-growing student markets such as Australia, the imbalance is acute, with only 7% of students accommodated in purpose-built student housing.
Due to the relative infancy of the sector in Western Europe, pipeline across some markets lacks transparency. In Germany, the private pipeline across the top 30 cities is currently estimated to be in the region of 25,500.
In Spain approximately 3,200 units are projected to be developed in the next five years, with 70% of the future pipeline located in Madrid or Barcelona. France has a pipeline of 9,300 private units forecast between 2015 to 2020. In 2014 the government set a delivery target of 40,000 units of public student housing by the end of 2017.
In the undersupplied Australian market almost 28,000 units are planned to be delivered across eight main Australian student housing markets over the next four years. Melbourne and Brisbane are the largest recipients of this supply, with 11,453 and 11,216 units respectively.
In some markets, high land values are a barrier to entry, a problem particularly acute in first-tier, world cities. London, Sydney, Paris and New York are all characterised by high land values and strong demand for the development of other asset classes.
It is no coincidence that most PBSH to date has focused on the premium market. There is huge untapped demand at the lower price points but in many cases more affordable product does not stack up from a development perspective.
Other markets come with particular cultural challenges. In southern Europe, domestic students tend to live and study in their home town or region. The majority live at home with parents, (as many as 75% in Italy for example). This trend is much less pronounced in northern European countries; only 6% of Danish students live with their parents, for example.
While tendencies for many European students to live with parents reduces the requirement for dedicated student accommodation, the presence of international students may be expected to offset this.