We analyse opportunities within the real estate sector and, without a doubt, student residences in Madrid are a growing trend. The increase in demand, the limited supply and the stability of these assets have made this segment an interesting bet for investors.
This opportunity stems from the growing trend towards accommodation for university students, in addition to the shortage of supply. This contributes to the consolidation of these assets within a framework of stability that places this market in an attractive position for both national and international investment.
Expanding market
Madrid is one of Europe’s top university destinations. The city has a diversity of students that other places do not have, as the capital is home to a concentration of national students, as well as a growing number of international students seeking training in its prestigious universities and business schools. This high concentration of students has boosted the demand for specialised accommodation, making residences a very attractive investment option.
According to recent data, Spain will lead the investment in student residences in Europe in 2023, with €416 million transacted. Madrid, in particular, accounts for 15% of the total PBSA (Purpose Built Student Accommodation) supply in the country, and continues to be one of the most sought-after cities.
Shortage of supply and high profitability
Despite the growth of this market, the supply of student residences in Madrid is still not sufficient to cover the demand.
This imbalance between supply and demand drives yields. Prime yields in this segment are close to 5% in Madrid and can increase in secondary locations. In addition, student residences tend to maintain good occupancy rates, with assured rental contracts per academic year, which guarantees stable and recurring income.
Residential market preferences are evolving
The student profile has changed. They are no longer looking for just a room, but for an accommodation experience with quality services and spaces. Today’s residences include gyms, study rooms, common areas and additional services such as cleaning and catering.
In fact, figures show that around 60% of the current beds in student residences in Spain belong to old or poorly managed buildings. This creates an opportunity for new projects or refurbishments of halls of residence that meet the quality and design standards demanded by today’s university public, and that allow for an early and attractive return on investment with balanced prices.
A favourable regulatory framework for student halls of residence
Another key point is that student residences are classified as tertiary assets, which excludes them from the restrictions of the Spanish Housing Law. In addition, the cost of land for these developments is lower than residential, which improves the return on investment and facilitates access to land in strategic locations.
Investment in student residences in Madrid is a business opportunity with high occupancy rates and attractive returns in a growing market. The combination of increasing demand, shortage of supply and a favourable regulatory context make this sector an option to consider within the real estate sector in Spain.
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