Spain & Portugal: promising markets for student housing, but with a highlighted need for more ESG innovation

June 20, 2023


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This article will focus on two major aspects on the student accommodation sector of Spain and Portugal; the current landscape of their respective markets, and the significant opportunity for student housing to lead the way for sustainable innovation in the region.

Portugal and Spain have been turning investor attention to their growing student housing market for the past few years as international students come into Iberia in increasing numbers every year. From 2015 - 2021, there was there was an 55.5% increase in international students attending Portuguese universities [Lexology], while Spain experienced an increase of over 20% in international students over the past 5 years [Erudera]. 

This growth in the number of young people in the higher education sector can be attributed to a highly diverse number of factors. Besides the attractiveness of Iberia’s beautiful cities, quality of life and culture, many reasons can be attributed to developments in the pan-European international education landscape of recent years.

The expansion of initiatives such as the Erasmus program and universities consolidating with accommodation providers, have allowed for greater student mobility in recent years, or at least a surge in interest for studying abroad [Spain Real Estate].

The number of student beds, however, have not been able to keep up with the soaring demand. In Portugal, the provision rates in Lisbon and Porto are still below the European average. Between Lisbon and Porto, the supply of PBSA is approximately 6,000 beds, and other academic cities such as Coimbra, Braga, Aveiro, Évora and Covilhã are still severely lacking accommodation. Meanwhile, there were more than 410,000 university students in 2022.

This leads the majority of students to rely on the private rental sector, which is beset by the difficult circumstances that define the larger housing market of Portugal — sky-high rents and a lack of viable housing, exacerbated by the golden visa schemes that have been ongoing in the country for years. 

A similar undersupply of students beds is true for the Spanish market where the average provision rate is about 7% [Savills], and the number of international students only continue to grow (+7%  in the 2021/2022 academic year).

This situation presents a significant opportunity for investors to step in and capitalize on the growing student housing market in Portugal and Spain. With the combination of increasing student numbers and the undersupply of dedicated student housing, investors can expect to benefit from a strong demand and the potential for attractive rental yields and long-term capital appreciation.

Realizing the Iberian Green dream with PBSA:

Besides increasing the availability of housing, there also lies the opportunity for ESG innovations to take centre stage in the student housing sector for Spain and Portugal.

In our takeaways for The Class Conference 2022, we highlighted that the agenda for green developments, investments, and operations should become a top priority for the region moving forward. Young people are becoming increasingly climate-conscious and meeting the bare minimum in sustainable practices is no longer sufficient for them.

However, much work needs to be done in both countries as their markets fall behind the rest of Europe in terms of reducing carbon emissions in the residential sector.

Buildings play a significant role in Spain's overall energy consumption, contributing to 62.9% of the nation's electricity demand in a 2019 study. This surpasses the European average of 58%. 

Moreover, Spain and Portugal had the third and second weakest decrease in residential sector carbon emissions across Europe respectively. From 1990 to 2020, the per capita carbon emissions dropped by 33% on average across Europe. Meanwhile, the emissions from the Spanish residential sector only fell by 1.5%, with even less for Portugal [ING].

These statistics, based on the Annual Energy Data Report, highlight the importance of promoting energy innovations to enhance building energy efficiency and decrease electricity usage in alignment with the EU's climate objectives. 

Given how the student accommodation sector often paves the way in implementing ESG innovations and sustainable developments [Lexology] [Osborne Clarke], Spain and Portugal provide an opportunity for PBSA developers and investors to become trailblazers that inspire the rest of the housing market to follow suit. It is well-established that students and young people are some of the most motivated demographics in tackling climate change — causing most PBSA schemes to think about embedding ESG values even further compared to other real estate.

Iberia is also the perfect region for innovations and new developments. Both Spain and Portugal ranked highly on the 2022 Global Innovation Index (29th and 32nd out of 132 economies), and their cities are full of pioneers who are ready to make these changes happen. Where the weather is warm and sunny, exciting developments for students and investors are sure to come.

At our Student Living Forum on Iberia, we hope to continue the conversation on the sustainability agenda and much more!

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