Over €12 Billion to be Invested in European PBSA Over the Next 5 Years
The European Purpose-Built Student Accommodation (PBSA) market is set to witness a significant influx of investments, with over €12.3 billion expected to be allocated over the next two to five years.
The insights come from the latest European PBSA Investment Barometer Report, a collaborative effort by the non-profit organization The Class Foundation and real estate company Savills.
Published during The Class Foundation Conference in Barcelona on November 9, 2023, the report sheds light on the future landscape of PBSA investments in Europe.
Europe boasts approximately 1.94 million PBSA beds.
As of now, Europe boasts approximately 1.94 million PBSA beds, both public and private, with an estimated total value of around €286 billion. However, the survey conducted as part of the report indicates a strong expectation of growth in the sector.
The surveyed 11 European investors and operators, collectively managing PBSA assets worth €17.8 billion and totalling 122,500 PBSA beds, foresee an addition of 93,600 beds and an investment of €12.3 billion over the next few years.
The anticipated investments will be spearheaded by key European countries, including Spain, Italy, Germany, France, and Portugal. These nations are poised to witness substantial growth in the PBSA sector, meeting the rising demand for student housing.
Despite the positive outlook, the report highlights several challenges that may impact PBSA investments in the coming years.
Survey respondents pointed out that securing planning permission is a significant hurdle, with 45% citing it as a major challenge. Additionally, economic factors such as European and global economic growth, interest rate movements, inflation, housing, affordability, and regulations collectively pose disruptions to the progress of the sector's investment.
Dealing with Non-compliant Stock
The report delves into the strategies of investors in dealing with existing stock that doesn't meet Environmental, Social, and Governance (ESG) standards.
Sixty-two percent of respondents plan to refurbish non-compliant stock to meet ESG regulations, while 23% intend to sell it. This reflects a commitment to sustainability and aligning with evolving ESG standards.
Key Concerns: Debt and Equity
According to the findings, the biggest concerns for investors in the PBSA sector are related to equity and debt for development.
Given the economic backdrop, respondents expressed apprehensions about securing both equity and debt for their development projects. However, this challenge also presents an opportunity for investors who have already raised capital and are prepared to deploy it in this thriving market.
Apart from debt and equity, the report highlights land acquisition and affordability as significant challenges for investors.
Site connectivity remains a critical factor in choosing between green or brown belt land, with sustainability, construction costs, and complexity following closely behind.
The European PBSA market is on the brink of a substantial transformation, fueled by a projected investment of over €12.3 billion in the next two to five years.
While the sector faces challenges, the report indicates a strong determination among investors and operators to navigate these obstacles and meet the growing demand for student accommodation.
As the PBSA landscape evolves, stakeholders will need to collaborate to address challenges such as planning permissions, economic uncertainties, and sustainability standards to ensure the successful development of much-needed student housing across Europe.
