- Study reveals severe shortfall in CEE student housing - with a potential value of up to EUR 4bn
- Warsaw found to be the most under-supplied CEE city for student housing, followed by Budapest
- 32% of surveyed investors are already active in CEE student housing sector or intending to be in the short to medium term
- 91% of investors believe that the CEE PBSA sector will grow in importance within 8 years
London, April 17, 2019. A new report by Colliers International and international law firm CMS has revealed that Central and Eastern Europe may be facing a significant shortfall in student housing in the next 10 years. The firms’ third annual joint Real Estate report, ‘Student housing in CEE – the next big thing’ looks at the evolution of the student housing sector in the core CEE-6  countries, and canvasses views from investors on the relevance of CEE student housing as an asset class and their expectations for the future.
A lack of affordability, the availability of very cheap but low-quality private houses and state-owned dormitories, and tight university budgets have all stymied development of student accommodation in CEE. A key demographic shift marked by strong growth in international students is though shifting expectations, and perhaps affordability, towards international norms. But is the region equipped to cope with this potential influx?
Investor appetite for student accommodation growing
Over 32% of investors surveyed for the report are active in student accommodation in CEE or indicated that they intend to be. Poland was ranked as the most popular market for both existing investment activity and those considering investing in the future (50% of respondents), followed by Czech Republic (28%) and Hungary (14%). As the report reveals, supply in many regions is falling well short of forecasted demand.
According to the report, most CEE cities will suffer from a significant shortfall in student accommodation by 2028. Using a demand-supply model, matching a calculated assumption of the number of international students in the city against the supply of beds, it was revealed that Warsaw will have the highest housing shortfall in 2028 (-8,399 bed deficit), followed by Budapest (-3,679), Krakow (-1,227) Prague (-1,795) and Bratislava (-298). Bucharest was the only city to have had come out with a surplus. In this scenario and counting one bed per bedroom unit, the implied value of stock equates to EUR 1.22bn.
Mark Robinson, CEE Research Specialist in Colliers International comments:
“Student activity and spending is not especially moving in line with an economic cycle. Thus, the end user demand is not correlated with that for sectors more tied to faster GDP growth, for example office or industrial. These characteristics are worthwhile for investors to consider right now, given that GDP growth estimates for the Eurozone (and other countries around the world) are being revised downwards.”
Opportunity lies with developers in short to medium term
Over 87% of investors surveyed believe that there is a significant shortfall in the supply of CEE private purpose-build student accommodation (“PBSA”). When investors were asked about whether to build or buy PBSA products in CEE, a clear majority of respondents (74%) were prepared to develop the assets themselves rather than rely on buying ready product.
This trend is already evident across the region, with eight private student residences in development including Golub GetHouse’s LivinnX project, a modern student residence hall with 290 residential units in Krakow. Griffin Real Estate, who created Student Depot, the premier network of private rental dorms across Poznań, Łódź, Lublin and Wrocław, has also signaled its intention to invest in more projects in Kraków and Wrocław by 2021, increasing its number of beds to 2,700.
Ermanno Boeris, managing director Colliers International Slovakia evaluates: „The lack of dormitories in required standard has often led students to share private apartments. Number of private dormitories is very low in Slovakia and all of them report full occupancy. We are convinced that students are interested in living in well-equipped full service dormitories. Therefore, investing in this type of real estate can also be an interesting alternative to traditional investment schemes.“
A renewal of student housing stock on the cards?
Students interviewed for a 2017 survey expressed frustration about the low quality of housing stock across the region, with Romania receiving the highest levels of dissatisfaction when asked about housing cost, location, quality and commute. Poland also fared poorly. With international students as a proportion of the population growing at an average of 3.6% year-on-year across the region, the report suggests a renewal of student housing stock may be overdue in order to attract international as well as native students, the latter whose numbers have shrunk in recent years. Affordability is, as the study reveals, an issue particularly with local students. Over 20% of students surveyed in 2017 across the CEE-6, except in the Czech Republic, suffered financial stress.
Michal Huťan, head of CMS Slovak real estate practice comments: “Although the Slovak market for student housing is currently not facing similar pressures as in some of the surrounding markets. In recent years, we have seen some specialised developers starting to monitor the market as Bratislava is becoming increasingly interesting for both international investors and international students. This being said, the young asset class of purpose-built student housing could certainly become increasingly sought-after product.
Wojciech Koczara, CEE Head of Real Estate and Construction at CMS, comments:
“The present supply of PBSA in the core CEE-6 markets is currently limited to 20 assets. But with eight presently under construction across Warsaw, Krakow and Bucharest, development activity in the sector is growing - although arguably at a pace slower than needed, as investors begin to realise the sector’s potential.
Our report shows that as an asset class, PBSA is counter-cyclical in nature, a positive when considering the current political climate and sluggish economic growth forecast in Europe over the next 1-3 years. With steady investment yields of 5-7% across Europe and strong demand shown by international students for CEE assets, the potential for development is enormous - although affordability remains an issue."
 CEE: In this report, we focus on the CEE-6 countries: Bulgaria, Czech Republic, Hungary, Poland, Romania and Slovakia.
 Based on current student data and projections for international students at the rate of growth observed in Eurostat data between 2013 and 2016
 At a 20% adoption rate
 EuroStudent VI survey (2017)
 EuroStudent VI survey (2017)