“It is clear that demand is growing faster than supply”, said Rainer Nonnengässer, Executive Chairman, International Campus. “The effects of the pandemic are disappearing and international travel is picking up”.
The gap between demand and supply remains wide even if there has been a lot of construction and investment activity in the market. Last year 181 new properties were delivered and over 50,000 beds added, but there is a lot more to come. According to BONARD research, there are 200,000 beds and 850 assets being planned or already under construction in the UK and in Continental Europe.
“It’s a very strong market to go into and it presents a huge opportunity”, said Richard Pilkington, Senior Managing Director, Head of European Real Estate, CAIN International. “But in order to find the opportunities you need to have people on the ground and you might have to consider going up the risk curve and taking on planning and development risk”.
With land prices increasing and building costs rising, many developers have turned to offsite design and construction methods to speed up delivery times. “Our pre-fab solutions and modular technology have been in such high demand from PBSA investors that we now have a dedicated factory”, said Jake Jephcott, Chief Development Officer, Vivia. “We follow the trend, adapting and playing with the dimensions. Gone are the days of a box with a mattress: the standard required is high and the product is akin to a very good hotel. It is a very strong market”.
Even in 2021, when there still were travel restrictions, occupancy rates were on average 94%, with peaks of 99% in Belgium and Italy, according to BONARDdata, which shows how resilient the sector has proved to be.
“Since October 2021 we have returned to 2019 occupancy levels almost everywhere if the product is right”, said Samuel Vetrak, CEO, BONARD. “The imbalance between supply and demand is unquestionable and it’s everywhere in Europe. We now get more calls from investors wanting to enter the market than from people wanting to sell. It used to be the other way around”.
Students have voted with their feet, making their preference for in-person over online study very clear.”Even during the pandemic, the shortfall in international students was compensated by intra-Europe students”, said Nonnengässer.
Investors have responded to the demand and have seen the figures. The average deal value per bed in Europe has increased from €119,520 in 2019 to €140,337 in 2021, according to BONARD research.