31 January 2018

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Private student dormitories. Unused niche on the real property market.

An insufficient number of lodgings offered by higher education institutions and a growing number of students from abroad gives rise to an opportunity for the private sector, which can fill in the widening gap between the demand and supply in the Polish market. Private student dormitories are a convenient manner for diversification of the investment portfolio, offering an above-average rate of return. What are further vistas for development of such a market in Poland and in the world? What does the market offer to students and to investors?

Currently, the number of students in Poland is ca. 1.35 million. Somewhat less than 15% of full-time studies or 10% of students in general can count on lodgings in public student dormitories. Therefore, there is a higher demand for private student dormitories, which have so far been an unused niche on the commercial property market.

The potential of the private student dormitory market in Poland

The supply on the student house market is low and the demand is not getting lower. According to the estimates of the Ministry of Science and Higher Education, despite a falling tendency of the number of students in the recent years, their population in Poland will have increased to 1.49 million by 2035. What is more, demand for private student dormitories in Poland is also increased by a growing number of international students, who – due to a very long distance to their family place of residence – will be one of the more significant target clients of that type of projects.

From 1990 to 2016, the number of students from abroad increased from 4 thousand to nearly 66 thousand. If that rate is maintained, in 2020 there can  be ca. 90 – 120 thousand students from abroad in Poland – comments Rafał Kroczak, Analysis Director at Metropolitan Investment.

The private student dormitory market in Poland is currently at an early stage of development. Currently, there are ca. 40 of that sort of facilities in Poland. Most of them are property of individual natural and legal persons and additional 36 facilities are owned by non-public higher education institutions. The academic community most often focuses around the largest and the most popular higher education institutions. For many years, most students has been studying at the University of Warsaw and the Jagiellonian University, but a high number of students also study at the Wrocław University of Science and Technology, University of Lodz and the University of Gdańsk.

Mature foreign market

The market of private student dormitories is strongly developed in the countries of Western Europe and USA. One of the most mature markets in Europe is Great Britain, where high increase in the number of international students was observed. New student dormitories are still being built and investors’ interest is still very high. This in turn translates into the achieved levels of investment profitability. In the academic year 2016/2017, rates of return in the best localisations were at 4.5-5% and in the least attractive localisations – ca. 8-10%.

“The market of private student dormitories in Poland is at a very early stage of development and is characterised by a high diversity. Its growth results from increase in the number of foreign students and a low availability of rooms in student dormitories, especially compared to more developed markets. Many students decide to rent out flats or rooms when studying. However, there are investors interested in investment in private student dormitories. In 2016, the investment volume in the world in this sector was the record-breaking USD 16.4 billion, which is the highest result in the history of this market” – says Wioleta Wojtczak, Head of Research Savills.

The Netherlands and Germany are also among the fastest developing markets in terms of the number of students. A great advantage here is a perfectly developed offer of majors in English, which effectively attracts students from abroad.

Modern conveniences

Modern designs of private student dormitories assume 1-2-bed flats with a kitchen and a bathroom. Moreover, the offer created by investors and developers is improved by numerous facilities in the building such as Wi-Fi network, gyms, laundries or parking spots for cars and bicycles. The finishing of the investment on a turnkey fulfils all functions of a full-sized flat and the location guarantees convenient access to the education institution. The space is designed so as to provide the residents with maximum convenience, privacy and safety. Development and investment company Metropolitan Investment S.A. is currently implementing two such investments in the Tricity – Gdański Harward and Olimpijskie Apartamenty.

Compared  to student public facilities, the occupancy rate in private student dormitories is much higher. In 2016 it reached over 80% of all available beds. At the same time, the occupancy in public student dormitories is regularly going down and is currently below 80% – adds Rafał Kroczak, Analysis Director at Metropolitan Investment S.A.

A dynamically growing number of students coming from abroad along with a rich didactic offer of higher education institutions nurtures investors’ interest in new products on the profitable real property market. Developers offer individual clients the possibility to purchase individual premises in common buildings and to rent them out to students in the form of long-term tenancy.

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