JLL: Investment In Student Halls Could Reach €600M In 2017

13 March 2017 – Observatorio Inmobiliario

Student halls of residence are attracting interest from real estate investors. In fact, experts calculate that the volume of investment in this kind of property in Spain could amount to around €600 million in 2017, a vertiginous increase with respect to the figure recorded in 2016, when investment amounted to €45 million, according to estimates provided by the real estate consultancy JLL. (…).

In this context, JLL has prepared a report “The student residence market in Spain”, which analyses, for the first time, the weight and forecasts for this market sector within the wider Spanish real estate market.

According to Nick Wride, Director of Alternative Investments at JLL, “several factors explain the interest in this project. Spain is one of the favourite destinations for international students to spend some of their educational years, which means there is a clear demand for accommodation. In addition, the market has a lot of potential because it is only just beginning and it is already offering some attractive returns with respect to other products – there is no doubt that halls of residences are going to be one of the star real estate products of the year”.

In fact, the initial return from prime halls of residence in Spain is 5.75%, above the yields generated in countries such as the UK and Germany (5% in both cases), where the market is very developed.

Need for supply

At the end of 2016, Spain had 1,129 university halls of residence and colleges, which translates into just over 91,000 beds. By autonomous region, Madrid had the highest number of beds, accounting for 19% of the total, followed by Cataluña (15%), Castilla y León (14%) and Andalucía (12%). Those four autonomous regions accounted for 60% of Spain’s total stock.

Spain has a university population of 1,513,513 students, of which 6.3% are from overseas. This presence is more palpable for students studying Masters (19.2%) and Doctorates (23.3%). 45% of these international students come from Europe, 25% from Latin America and the Caribbean, 10% from Asia and Oceania and the remaining 20% from other regions.

There is a large difference between the projections for expected demand and the current supply in terms of student beds, given that around 375,000 students are estimated to be looking for accommodation (in student halls or rental homes in Spain). If to this we add the fact that over the next two years less than 2,000 new beds are expected to come onto the market, it is clear that a need exists to generate more supply to meet this demand. (…).

The first major operation of the year

Last week, the student halls chain The Student Hotel (TSH) acquired the “La Imprenta” building from Threesixty Developments, a company owned by the US fund Oaktree Capital Management. The property is located on the central Madrilenian street of Cuesta San Vicente, 28. TSH plans to convert the building into a mix-used hall of residence and hotel. The real estate consultancy JLL participated in the operation as advisor to the vendor.

This is The Student Hotel’s second purchase in Spain, following its acquisition of two student halls in Barcelona at the beginning of 2015, Melon District Marina and Melon District Poble-Sec, in an operation that was also advised by JLL. (…).

Original story: Observatorio Inmobiliario 

Translation: Carmel Drake

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