At the last Class Conference in Madrid, we held a panel discussion and market update on France; where important information was revealed on the market trends in the country encompassing the last several years. We hosted this panel with industry leaders in France such as Kley Housing and UXCO group, with a data insight provided by Knight Frank.
The data insight by Knight Frank revealed the significant growth in investment volume over the last 5 years and the continued increase in international students, with a total 15% increase of student numbers. This growth in the student housing market extended to other cities such as Lille, Lyon, Marseilles.
However, the panel also took the conversation to how the market would develop in coming years, where the speakers talked about the topics of affordability, alternative asset models, and the challenges that limit transactional volumes from being as high as they could be - such as the prevalence of private individual owners as housing providers, the high costs involved with entering the market, and problems finding opportunities for land and development.
Here are a few key takeaways from the panel in greater detail;
- A market that remains largely undersupplied
At the time, in spite of having 2.7 million students, France only had 380,000 places in both public and private residences. In Paris, the gap in supply was — and still is — enormous. For example, CROUS (an organisation covering the overall needs of students, including housing) has only 5,300 student rooms offered for 160,000 students.
Over the last 5 years, increase in the total number of private PBSA beds have grown at a steady rate of 6 to 7.5%. From 93k beds in 2018, there are now 122k beds in 2023 and there is an estimate of 20k beds in the pipeline, coming to fruition by 2025.
As such, while there is definite growth, the demand is exceeding the current and near-future supply by a lot. Even if new developments pop up, they would take years before they can welcome residents.
- All roads lead to Paris
Out of the 2.7 million students, almost 2 million of them are in Paris and surrounding areas. A similar trend is seen when it comes to PBSA beds, 71% of the stock is in the Parisian area as opposed to only 29% in the rest of the country. While there are reputable universities across the whole nation, the draw seems to be the French capital for local and foreign students both. Unsurprisingly, rents in Paris are much higher at around EUR 770 in 2022/23 compared to the rest of the country at EUR 536.
This has led our community to stress that moving forward, education in France should be more diversified beyond Paris and universities in other regions must be promoted. Satellite campuses of Parisian universities in smaller cities and towns can help dissipate and even out the student population better.
- Key Barriers to the markets
Rising energy and constructions costs are affecting the European real estate sector, and French PBSA market is no exception. Costs in Paris are already much higher than the national average, and with rising costs, this will only increase in severity — making housing even less accessible to more students.
Furthermore, there is a scarcity of built portfolios to enter the market as unsurprisingly, current operators are seeing almost a consistent 100% occupancy. So, new players must start with developing assets, which would take few years to see ROIs. This would also entail having to go through the multi-step hurdles of obtaining permits, meeting development deadlines and so on.
The next step: continuing the conversation
At our upcoming online forum on the 23rd of February, we hope to continue the discussion and see how these trends have been developing thus far. We’ll continue to ask why that in spite of the growing number of students and increase in demand, the market is still muted in comparison to other countries in Europe.
We also intend on uncovering the vision for higher education from an institutional and governmental perspective, and how this will align with the provision of student accommodation.