Student Living Iberia 2023

Insights into the future of student living in Iberia

Over the last decade, Iberia has applied a multifaceted effort to not only promote itself as a travel and study global destination but also as a hub of innovation and research to draw talent close and far from home. Besides Barcelona and Lisbon, growing cities such as Valencia, Malaga, Porto, Bilbao, Coimbra and more are drawing in students from Europe, Latin America and Asia. At this Student Living Forum, we explored the state of the Iberian student housing market and what opportunities were in store for the region.

Theme

Last week, on the 13th of July, we explored the promising student housing market found in the Iberian peninsula. Spain and Portugal, known for their inviting and open culture, has seen consistent growth in the number students coming into the countries over the past several years, engendering demand for suitable accommodation.

In this comprehensive article, we bring you 5 key takeaways from the insightful panel discussions and data presentations centered around the dynamic student housing market found in Iberia.

The discussions revolved around building sustainable communities and creating inclusive spaces, while the data insights shed light on the market's resilience as an asset class, transaction volumes, and the influence of student numbers on investment trends. Below are the core takeaways from the event:

  1. Building sustainable cities of the future: The importance of working with communities and empowering residents

The inspirational dialogue session invited Costanza De Stefani of C40 Cities, and Juliana Petrikova of Nido to explore how sustainable goals, community, and student living can synergise to bring about positive impact.

Costanza explained that their organisation is an international NGO that supports cities and mayors in combating the climate crisis. By involving students in the process of urban design, they can empower the next generation to take part in the transformation of cities for the future. The panel also discussed the concept of a "15-minute city," where residents have easy access to essential services within a short distance from their homes.

Juliana from Nido spoke about the significance of working with communities and making a positive impact on the lives of students. Nido's focus on community engagement is a core aspect of their operations and provides them with valuable feedback for improvement. They adapt their model to cater to different local markets and emphasise sustainability among their student residents.

Both panelists agreed that one of the most effective ways to create long-term sustainability in communities is through behavioral change. Having students and residents recognise their own consumption goes a long way in reducing energy use, so utilising technology and collaborative tools, such as sensors and community apps, to monitor each other makes a big impact. These were some of the methods implemented by C40 in certain neighborhoods, and by Nido in their buildings, to great success.

  1. A Market of Growth and Opportunities: PBSA remains resilient, with positive student growth in Iberian cities

The data insight presentation given by Stuart Osborn of Knight Frank illuminated some of the recent market data on the PBSA sector across Europe, with a focus on Spain and Portugal. As it stands, the student housing asset remains very strong and was the only asset class across Europe where investment volumes were up year-on-year in both Q4 ‘22 and FY 2022.

In 2022, Spain saw its largest PBSA investment volume in the past 5 years, at around 1.1 billion euros while Portugal also experienced a high investment volume at around 220 million in the same year.

Despite challenges, Knight Frank’s data showed positive student growth in Spain and Portugal, considering both cyclical and international student demand. Overall, the total number of students in Spain has reached above 1.7 million, and in Portugal this number was around 430,000, with a massive 41% increase in international students.  

Valencia, Barcelona, and Seville were highlighted as standout markets with substantial student growth, driven not only by universities but also lifestyle attractions.

  1. Welcoming PBSA in Iberia: Overcoming investment, planning, and operational challenges

Joining us for the panel discussion were Pavlina Chandras of Livensa Living, Hugo Gonçalves Pereira of ReVentures, Christof Flöckner of MILESTONE Student Living, and moderator Kelly-anne Watson of The Class Foundation. To start the conversation, Kelly-anne noted how both Spanish and Portuguese stakeholders welcomed PBSA as an asset.

According to Pavlina, student housing was seen neither as hotels or as true residential assets, but as a complimentary service to universities, and a way to relieve more burden from the tight residential market in most cities.  

While it was agreed that student accommodation was starting to be seen in more favourable light, it was revealed that some cities were more welcoming to the asset than others. Some cities were flexible in terms of development and permits, while others faced obstacles from both central and local governments. As such, the conclusion was that it really comes down to the local municipalities in different cities.  

The panelists mentioned some of the most difficult cities for new assets are Lisbon and Valencia, despite their growing student populations. The reason for this is attributed to several factors such as the lack of a digital framework in cities such as Lisbon, many layers of bureaucratic approval process, and the frequently changing leadership, which may or may not favour PBSAs.

On the other hand, some of the best and most receptive cities cited were Porto and Coimbra due to their flexibility and relatively quick approval times.  

  1. Time for a change?: Rising rents, and the readiness for non-inclusive packages

With global build cost inflation and rising operating expenses, maintaining affordability becomes a continuous challenge for student housing properties. Although the build cost inflation is starting to level off, it is still on the rise, impacting development projects.

This, coupled with other extraneous factors such as new regulations and the need to implement costly technologies for energy monitoring also contributes to cost increases. The panelists acknowledged that while they strive to control rents, external factors sometimes limit their ability to keep prices down, which prompted the question of whether or not it is time to introduce non-inclusive rent packages.

The answer, while not so simple, was that it would be difficult to implement immediately especially since students have already gotten comfortable with the common inclusive pricing structure. Establishing non-inclusive rents would also require many costly changes on the business side, with having to accurately monitor each room for instance. As such, operators would need to find more creative ways to enact behavioral change among residents, such as gamifying their consumption or using creative graphics to show how much energy they are using.

So, while the panelists agreed that they would keep giving inclusive rents, they conceded that if the whole market started doing otherwise, they would have to follow it.

  1. Balancing the private and the social: Trends in the Iberian student housing market

Finally, the panel identified several trends in the market, with one of the prevailing ones being an increasing preference for single rooms over twin rooms. This might be the case because while students appreciate the privacy of single rooms, they value other avenues for socialising such as the presence of common rooms and amenities. The panelists mentioned consistently good feedback and interest in these common areas as the main means for residents to socialise.

The discussions on student living evolved throughout the day with each session highlighting important insights into the future of the student housing market in Iberia and the direction of the sector as a whole. Spain & Portugal are growing markets that are increasingly welcoming the idea of PBSA as an asset class over time. The biggest in challenges in the region stem from the administrative and bureaucratic process in some of the larger cities, as well as the task of keeping rents affordable with rising energy and build costs. These are common issues faced by operators across Europe, and the panelists of each session all agreed that one of the main solutions moving forward would be to bring students and residents into the fold, and empowermpowering them to take part in the transformation to sustainable communities.

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