Student housing emerges as Europe's top prime real estate investment
Purpose-built student accommodation (PBSA) has claimed the top spot as the preferred investment sector for European operational real estate investors, surpassing multifamily housing for the first time.
That's according to a new survey by Savills and Savills Investment Management of investors managing nearly £720 billion in real estate assets.
The findings highlight a shift in focus towards living sectors, with PBSA attracting 62% of respondents' interest, slightly down from 63% last year.
But PBSA has now overtaken multifamily investments, which fell from 84% to 57%.
Investors are targeting PBSA
Marcus Roberts, the firm's head of Europe operational capital markets, said: "Our survey reveals that respondents are looking to invest c.€50 billion over the next three years into Operational Real Estate (OpRE).
"The majority (73%) of this capital is targeting the living sectors, with multifamily (€8.1 billion) and PBSA (€7.4 billion) expecting to see the greatest inflows of capital."
Harry de Ferry Foster, the head of the UK investment management, adds: "As the most mature subsectors in living, we would expect to see European PBSA and multifamily anchor institutional OpRE portfolios.
"Equally interesting is the deepening demand for exposure to nascent asset categories like senior living, co-living and care; reflective of a broadening base of opportunities available to investors in living but also growing market sophistication."
PBSA has growth potential
Savills' survey underscores the strong growth potential of PBSA, forecasting a 70% expansion in the sector over the next two to five years.
Investors say they are planning to channel around £50 billion into operational real estate over the next three years.
Of that cash, the investors say that living sectors - particularly PBSA (£7.4 billion) and multifamily (£8.1 billion) - are expected to receive most of the capital.
Senior living and care homes have seen increased interest, with 41% and 35% of investors targeting these areas, up from 29% and 16% respectively in 2024.
The hotel sector, particularly budget accommodation, is also experiencing a resurgence, driven by the recovery of international travel in 2024 and anticipated growth in 2025.
UK is a top investment destination
Geographically, the UK and Ireland lead as the top markets for investment over the next three years, followed by Southern Europe (Italy, Spain and Portugal) and Western Europe (France and BeNeLux).
The proportion of investors adopting a pan-European strategy has risen from 10% to 16% year-on-year, indicating a broader approach to capital deployment.
Investment strategies are also shifting, Savills says.
The survey found that 51% of investors are already active in both PBSA and multifamily, with 36% invested in care homes.
Within the hotel sector, lifestyle hotels are the most common subsector, with 25% of respondents, while branded residences (7%) and affordable housing (15%) remain an investment niche.
Savills' capital advisor’s director, Charlie Bottomley, said: "We continue to see robust liquidity across both bank and non-bank channels, driven in part by the continued low level of transaction volumes.
"With fewer deals in the market, lenders are competing intensely for opportunities, particularly in the OpRE sectors, which remain a top priority for most capital providers."
PBSA is an investors' target
The managing director of Accommodation for Students, Simon Thompson, said: "With PBSA now the top target for European investors and an anticipated £7.4 billion influx over the next three years, the sector is poised for significant growth, particularly in the UK.
"The forecast 70% expansion in PBSA over the next two to five years signals strong demand, driven by a robust student population and a competitive lending environment that supports new developments."
He added: "The UK's student accommodation market still offers potential and landlords who seize this moment could find their investments will flourish."
