BNP Paribas: Spain’s Hall of Residence Market Will Grow by 4% in 2019

16 July 2018 – Eje Prime

(…). With 1,148 accommodation centres for university students located all over the country, split between halls of residences (963) and residential colleges (185), the domestic market comprised 93,500 beds at the end of 2017. Nevertheless, that supply “is small compared with current demand”, explains BNP Paribas Real Estate in a report to which Eje Prime has had access. For this reason, the international consultancy firm forecasts that this alternative market will grow by 4% in Spain in 2019.

In recent years, the sub-sector has recorded some major operations involving the sale of both assets and companies. The most important deal came at the end of 2017, when AXA Real Assets and CBRE Global Investment Partners invested almost €400 million in the purchase of the entire portfolio of Resa, the vehicle specialising in student halls previously owned by Lazora. Following the operation, the manager Greystar became the king of the halls in Spain with 37 assets under ownership (four of which were being developed). In total, more than 9,000 beds changed hands.

Resa’s sale is nothing more than a consequence of the current investor appetite, primarily from international funds, many of which specialise in this sector. In 2017 alone, fourteen student halls opened their doors, adding 2,149 new beds to the sector. Moreover, since this is a very fragmented market with many owners, we are seeing the purchase of large bundles of beds, which the new players arriving in Spain are using to initiate their expansion plans.

Such is the case of Corestate, an investment fund headquartered in Luxembourg, which purchased a former residence, containing 260 rooms and 302 beds, in Madrid in 2016 to renovate the building and give it its personal stamp. With support from Villar Mir, the company disbursed €40 million on that project. A year earlier, the Dutch company The Student Hotel paid the same amount for two halls of residence in Barcelona (Melon District Marina and Melon District Poblesec) containing 600 rooms in total.

Those operations led by international funds show the influence that foreign capital has and, above all, is going to have, in the student hall sector. A large part of this interest in the domestic market stems from Erasmus. Spain is the most sought-after country by university students, ahead of Germany, the United Kingdom and France. Two years ago, 45,813 young people arrived in the country, including Erasmus and international students on secondments, and all of them needed to find a bed for the year.

Geographical dispersion

Another one of the major attractions of the student hall market in Spain is its geographical dispersion. It is not only Madrid and Barcelona that are attractive: Málaga, Valencia, Sevilla, Salamanca and Granada are all cities with a large influx of students, many of them international, arriving every year.

Madrid is the city with the largest supply of rooms for students, with 21,159 beds in 198 centres at the end of 2017. That figure accounts for 23% of the total stock on the market in Spain (…). Cataluña was ranked in second place (…) with 170 centres and 14,177 beds, accounting for 14% of the stock. It was followed by Castilla y León (where Salamanca plays an important role) and Andalucía, with shares of 14% and 12%, respectively (…).

Activity is spreading to the north too. Just last week, the fund WP Carey paid €10 million to buy an office building in San Sebastián from Solvia, which it is going to convert into a hall of residence for students (…).

Original story: Eje Prime (by Jabier Izquierdo)

Translation: Carmel Drake