Skip to content

Real estate

Why Europe’s student living sector offers a potential edge

3 min read 24 Oct 22

A constant, in all economic weathers, is people’s value of higher education, as shown by a record number of students enrolled in colleges and universities during 20201. For the world’s rising middle class, top-ranking universities and cities steeped in heritage are a core focus.

A rite of passage

For many young adults, higher education offers qualifications that can open doors and often represents a rite of passage, largely defined by the university experience. High quality student accommodation therefore remains in strong demand, supported by the return of international travel.

“As overseas demand for higher education continues to grow, we believe the increasing affordability of Europe’s universities versus the UK offers a potential edge.”

Europe remains structurally undersupplied 

London continues to be a global centre of higher education, attracting students from all corners of the world. The purpose built student accommodation (PBSA) market has evolved over several decades, therefore students have access to dynamic, well-managed accommodation, in London and other major cities. Institutional-quality stock is increasing on the Continent, though many gateway cities remain structurally undersupplied. 

 

Cheaper tuition fees

As overseas demand for higher education continues to grow, we believe the increasing affordability of Europe’s universities versus the UK offers a potential edge. Italy is one of the top European targets for international students, particularly from the US and China, largely thanks to the country’s cheaper tuition fees and lower cost of living, combined with top-ranking universities and an increasing number of English language-taught courses.

Spotlight on Bologna 

Bologna is a key destination for both domestic and international students; home to the world’s oldest – and Italy’s largest – university. The University of Bologna is also recognised for its affiliation with the John Hopkins US research institute.

As a location, Bologna has a lot to offer. With a large student population, the city is vibrant with bars, coffee shops and art galleries. It is also easier to navigate by bike than other, larger cities, while only an hour by train from Milan.    

The living options available to students are typically direct lets or accommodation funded by the local municipality. However, there is a growing need for safe, amenitised accommodation that can easily be arranged. 

Meeting consumer needs

M&G takes an active role in developing living space tailored to consumers’ needs and local culture, in a sustainable way. Our student living asset in ‘Little Bologna’, less than 20 minutes’ walk from the university and high speed rail station, provides a spectrum of amenities that both facilitate study, and help to optimise the university experience. 

Rooms are equipped with kitchenettes, in addition to a shared kitchen with generous freezer space, honouring the tradition for Italian mothers to pack their children off with a large supply of home-cooked food. Students also have access to study areas, a yoga studio, gym, gaming pods, and sky lounge overlooking the city; a place to socialise. For students living away from home for the first time, especially those from overseas, spaces and events that bring people together can be fundamental to wellbeing.  

The building is powered by sustainable technology including air source heat pumps and energy saving systems; targeting LEED (Leadership in Energy and Environmental Design) silver certification. Reflecting the increased use of private, green transport, post-pandemic, it also provides 294 bicycle spaces, 18 electric scooter spaces and car charging points. 

Navigating the market

For core investors, Europe’s nascent student living sector can offer higher income returns, on top of the defensive and diversification benefits of residential real estate. 

Understanding both consumer needs and market complexities, from obtaining building permits to identifying the right operator, is crucial to investment strategies. The ability to leverage experience and relationships in other living sectors and geographies can help provide access to high quality real estate with long-term value.  

1 Refers to Spain, France and Italy. Eurostat, October 2022.

The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested. Past performance is not a guide to future performance. The views expressed in this document should not be taken as a recommendation, advice or forecast.

Related insights

LinkedIn

Twitter

The information in this site is intended for institutional investors only. No other persons may rely on the information found on this website or the materials available herein. Materials and information found on this website are not for onward distribution. The information and materials found on this website are for informational purposes only and are not an offer to sell or purchase interests in any M&G Fund. Shares in M&G Funds have not been and will not be registered under the United States Securities Act of 1933, as amended, or registered or qualified under the securities laws of any state of the United States and may not be offered, sold, transferred or delivered, directly or indirectly, to any investors within the United States or to, or for the account of, US Persons, except in certain limited circumstances pursuant to a transaction exempt from such registration or qualification requirements. The Funds will not be registered under the United States Investment Company Act of 1940, as amended. Any offer to sell or purchase of any interest in an M&G Fund must be made pursuant to local laws of the relevant jurisdiction in which such interests are offered. M&G Funds are not registered for distribution in Canada. M&G cannot accept any subscriptions into its Funds from investors resident in Canada. M&G plc, a company incorporated in England and Wales, is the direct parent company of The Prudential Assurance Company. The Prudential Assurance Company is not affiliated in any manner with Prudential Financial, Inc, a company whose principal place of business is in the United States of America or Prudential plc, an international group incorporated in the United Kingdom.