Over the last decade, Spain and Portugal have 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 in an attempt to draw talent close and far from home.  

Student numbers are on rise in both countries and the future of investment in the region for student accommodation sector seems promising.  

At our annual Class Conference in Madrid this year, we had two expert panels on Spain and Portugal with the likes of CBRE, Savills, By Urbania, Round Hill Capital, Livensa Living, Milestone, MiCampus Residendias, Yugo, Collegiate AC and RESA. Here are 5 key takeaways for the region:  

1. Undersupply in the Spanish market is leading to an investment boom

There are currently over 1.6 million students in Spain. The ratio of bed to student  is 1 for nearly 17 students. Spain is currently 400k beds short. The rapid growth of student population, thus leading to a rising demand in accommodation, creates a great incentive for further investment.

Investment in Spanish PBSA reached a value of EUR 500 million in 2021. This is an 82% increase from 2020. Total value of investments in Madrid city alone since 2017 is at EUR 1,000 mil. The student housing sector remains one of the most low risk and also the post profitable in real estate sector. Investors are seeing increased profitability at 4.5% in Madrid and Barcelona and 5.25% countrywide. 

There a total of 60 projects under development, which lead to nearly 21,000 beds in the Spanish market between 2021 and 2023 alone! 

2. Portugal tells a similar story: Investments on the rise but is it enough to meet the demand?

Portugal has nearly 412,000 students, which is quite a large number for a country its size. With lower cost of living (Lisbon and Porto have been ranked as among the most affordable student cities in the world), great weather and with relatively good English speaking populace, Portugal is unsurprisingly attracting international students which now comprise of 14% of its total student population. In fact, enrolment of international students since 2015/16 have increased by a whooping 55%,

In Lisbon and Porto, there are currently 10k beds, around half of the beds belong to the residences of public universities. The private sector have over 6,700 beds. The sector is rapidly expanding as post pandemic over 10 new residences were opened. Investment in Portugal has increased rapidly in the last 4 years, with plenty of institutional capital being pumped into the sector. In the next couple of years there are nearly 8k beds in the pipeline, with over 4.2k beds upcoming in Lisbon, and 3.6k beds in Porto. However, this falls short of the expected need of around 20k beds in the next 2-3 years.  

3. Spanish Tier 2 Cities and the Race to Creating the Best student Experience  

While Madrid and Barcelona remain of great interest for students and investors alike, in Spain we see smaller cities refashioning themselves as ideal university towns, more attuned to the needs of students, more affordable and ultimately offering more green spaces and quick escapes into nature. Many Spanish university students are looking to move into more scenic, spacious areas beyond the cities, which not only more healthier quality of life but are more easy on the pocket. Thus, cities like Valencia, Malaga, Salamanca, Granada, Seville, and Bilbao have stronger ever so stronger as university cities, drawing students from largely Europe and Latin America, but also Asia. 

In fact, many Spanish university students are looking to move into more scenic, spacious areas beyond the cities

4. It’s time to go beyond Porto and Lisbon

The preference in Portugal remains high for students to live in the big cities and also near city centres. Unlike Spain, students and thus interest to invest in PBSA remains largely concentrated in Lisbon and Porto. Private PBSA beds are almost exclusively in these two cities, with Coimbra coming in third. There are no private PBSA beds currently in Portuguese university cities such as Faro, Aveiro and Braga, and only a sprinkling by public/university accommodations.

There is a big investment opportunity in these Tier 2 cities that is yet untapped. As these cities definitely have students and every student needs accommodation. Further, even though usually the quality of university is the biggest decision maker, accommodation/cost of living makes an impact in deciding where to pursue higher education for many. If students have more affordable accommodation options available elsewhere they are perhaps more likely to move to other university cities. ‘Build them and they will come’ might just be true in this case

5. Iberian Green Dream  

The agenda for future proofing investments, developments and operations is top priority for our community. The only way forward is green. The youth of today are exceedingly climate conscious and want to practice sustainable ways to live. It is not simply about putting your trash in the correct colour coded bin but to actually commit to the ethics of it. We see the “less is more” ways of living and upcycling initiatives that operators are creating in collaboration with their student residents to not only future proof their buildings but also the local community. The shared agenda of eco-conscious living is also what is enabling operators and students to form stronger ties with their host cities. Sustainable practices are leading to added social value of the place, and our community is thrilled and aims to keep the momentum going with better and more green initiatives with students, local residents and city governance.  

Conclusion:  

Opportunities abound in Iberia as students flock to Spain and Portugal for great universities, amazing quality of life while also comparatively affordable than rest of Europe. The investment boom deserves to be celebrated! However, we must be cautious that the student numbers are rising faster than the number of beds entering the market. To prevent a Dutch story where students are left homeless for months without housing, HEI, city governance, policymakers and accommodation providers must find quicker and effective solutions as new PBSA builds would take a few years to deliver. In the meantime, the aim should to find smart use of exiting spaces such as mixed/micro-living solutions and identifying and refurbishing ‘dead spaces’ in cities and towns alike. Pumping life into these unused spaces can ultimately mean more homes for students, and thus a more diverse city, and of course, a great source of future talent for the place.  

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