The student housing industry is growing in global prominence. Foreign investors are flooding the U.S. Market in record numbers, and many U.S.-based owners and developers are broadening their lens to include investment and development projects across Europe and Latin America.
“We expect to see a gradual uptick in international student numbers in Europe over the next decade,” says Bella Peacock, managing director of investment, management and operations at Greystar Europe Holdings Limited. “It is fast becoming a top region for finding study programs in English, even in countries where English is not the local language. If you’re an EU citizen, you can obtain a free university education — with all your lectures taught in English — in almost half of all European countries, including Denmark, Austria, Norway and Greece.”
Greystar’s international student portfolio currently totals 50,000 beds across Europe. “We are the largest student housing operator in Spain and the third largest operator in the United Kingdom (UK), with a growing presence in the Netherlands, Germany, Austria and France,” says Julie Skolnicki, senior managing director of university partnerships at the Charleston, South Carolina-based firm. “In addition to recent expansion into Germany and Austria, we are planning to expand our student platform into Portugal and remain focused on scaling our robust presence in the UK, Spain and France.”
CA Ventures is another company with a foothold in Europe and Latin America and plans for heavy expansion over the next few years. “We have one operating asset in Europe — a 710-bed student community in Kraków, Poland — and three assets totaling 888 beds currently under construction in Glasgow, Edinburgh and Sheffield,” says John Diedrich, global head of investments and principal at CA Ventures. “By 2021, we will have approximately 2,900 operating beds in European markets with much more on the way for 2022 and 2023.”
The company’s international portfolio also spans across Latin America. “We currently have four operating assets in Bogotà, Barranquilla and Santiago – about 1,900 beds of student housing altogether,” says Diedrich. “CA plans to invest $325 million in Latin American markets over the coming years, with a focus on strategic markets in Mexico such as Monterrey, Mexico City and Guadalajara.”
The key to entering new international markets is painstaking due diligence and the building of a best-in-class team on the ground, according to Diedrich. “A firm understanding of rent levels and tenant affordability drives the basis for sound underwriting that can be achieved in the field,” he says. “We evaluate all new markets for risk/return metrics and only look to enter into new markets/geographies if we are comfortable that we can grow and scale a large portfolio of like-kind high quality properties.”
Harrison Street is also actively investing in and developing purpose-built student properties across the UK, Ireland, Spain, Germany and France. “We have plans to expand into other European geographies,” says Rob Mathias, senior managing director and head of international business at Harrison Street.
“Since 2015, Harrison Street has acquired or developed more than 18,000 student housing beds across Europe, working with best-in-class partners in top-tier European university markets backed by favorable demographics,” he says. “Most recently, we have announced developments including The Riverside, a 491-bed community in Canterbury, UK; and The Curve, a 350-bed property in central London.”
Similarities and Differences
While the target consumer remains the same both domestically and abroad, many differences are apparent between the two — from the sophistication of the market, to building requirements and stylistic preferences.
“The U.S. student housing market is the most mature and sophisticated in the world,” begins Diedrich. “There has been so much innovation in the space over the past 10 to 15 years, so the expectations for both products and services are high. In many international markets, the student housing sector is still being shaped.”
“I would say there are two main differences in terms of the physical asset itself: building program and building requirements,” he continues. “International units are more efficient and bed-to-bath parity is not necessarily the standard. Studios and other efficient unit types are more prevalent and more highly demanded. On the development side, there are fewer mandated life safety requirements such as secondary egress. These important features provide peace of mind to our residents, their families as well as our institutional investors and buyers.”
The starkest contrast between U.S. and international student housing can be found on the services side, according to Diedrich. “Our properties will be staffed with full-time staff and security for the convenience and comfort of our guests,” he says. “Professional in-building and corporate staff help to ensure resident satisfaction and regularly planned resident events and interaction promote a sense of community, which leads to resident satisfaction retention. We also provide a high-level of financial reporting, forecasting and transparency to our investors and prospective buyers. Implementing our standard operating protocols across our international portfolio helps to drive value at the properties, and therein returns to our clients.”
The market size and location of international universities is another notable difference. “Many of the major U.S. universities are located in smaller cities where the university is the dominant presence in the market and our tenants attend a single institution,” says Mathias. “In Europe, we are creating centrally located developments within major urban areas where we may have tenants attending up 12 to 14 different universities.”
“Student Halls are typically located in city centers or metropolitan areas as opposed to the traditional college town in the U.S.,” agrees Juan Manuel Acosta, managing director of Greystar Spain. “This is driven by the fact that higher education institutions are located within the city limits in most key European cities. Assets are typically smaller, ranging from 300 to 600 beds, and this responds to the above-average density found in European cities.”
“Regardless of geography, we are serving the same age demographic,” says Diedrich. “Location is hugely important because of the convenience factor — students want to be able to roll out of bed a few minutes before class and still get there on time. Property technology — namely wi-fi — is no longer a nice-to-have, it’s a must. Amenity spaces that support the comprehensive ‘live, work, play’ mentality are highly valued. Health, wellness and sustainability are important to Generation Z, so we integrate those things into the building itself, as well as our resident programming.”
The Road Ahead
“We are excited about the investment and development opportunities that exist in international markets and we are committed to further expanding the CA global footprint,” says Diedrich. “We are demonstrating that commitment with both investment capital and human capital. In the U.S., Europe and Latin America, we are in growth mode. We have a robust pipeline, we are actively looking for opportunities and we have boots on the ground in those regions. Beyond that, in Asian markets for example, we are in exploration mode.”
Harrison Street is currently evaluating new European markets. “We are assessing markets where we feel we have strong partners and can apply our demographically driven approach and rigorous diligence to source attractive opportunities for our investors,” says Mathias. “We will continue to expand our footprint both within markets where we are already very active as well as in new European student markets. We will similarly continue our expansion into healthcare and life sciences real estate in Europe, as we have been very active in this space in the U.S. for the past 14 years.”
Greystar also has plans for growth across Europe, Asia, Canada and Mexico in the coming years. “In addition to recent expansion into Germany and Austria, we are targeting expanding our student platform into Portugal and remain focused on scaling our robust presence in the UK, Spain and France,” says Skolnicki. “Greystar recently established an Asia-Pacific platform that will begin to evaluate student opportunities in Japan and Australia. Our U.S. platform will expand to include all of North America, and we are evaluating opportunities in Canada and Mexico.”
— Katie Sloan
This article originally ran in the January/February 2020 print issue of Student Housing Business. To subscribe, please click here.