The segment’s potential was highlighted by Nick Wride himself, director of student residences at JLL EMEA, who explained that «we are living very interesting times for the segment in Spain, we will witness the segment’s change from a consolidation stage until it reaches the institutionalisation stage: developers who entered the Spanish market some years ago are accumulating portfolios and gaining volume with them. From 2020 onwards we will see operational student residences’ portfolios being traded».
The truth is that there are more projects on the pipeline for the coming years. With the new developments, 2020 should present an offer of 97.000 beds. In 2021, this offer should increase to 107.000 beds and in 2022 to 116.000, revealed the report “Residencias de Estudiantes: de la consolidación a la institucionalización” (Student Residences: from consolidation to institutionalisation) compiled by consultant JLL.
Nevertheless, these new beds should not be enough to meet the country’s demand which keeps on growing. In 2019, this imbalance represented 430.000 beds, 5.2% higher than the previous year.
This mismatch between offer and demand, together with «attractive» yields for the segment, may turn student residences «into one of the segments with most potential» within the country. In Madrid and Barcelona, yields are set at 4.75% and in the secondary cities at around 5.25%. According to the report, these yields are in line with those of the most profitable assets, such as is the case of senior residences (5%), hotels (5%), logistic assets (4.75%) and shopping centres (4.9%).
The segment did not remain unaffected by the pandemic
Despite its good moment, the segment did not remain unaffected by the Covid-19 pandemic. The latest data from JLL shows that 88% of investors, operators and developers had their businesses impacted due mostly to «the reduction of rents on contracts that were already in place, early termination of contracts and delays on ongoing projects». But the future prospects for the majority of respondents include the segment’s recovery.