Credit: Adobe StockPBSA in Europe: High Demand, Limited Supply, and What It Means for Developers
Discover the growing opportunities and challenges in Europe’s Purpose-Built Student Accommodation sector
September 18, 2025Real Estate
Written by Rory Hickman
As the student housing market in Europe experiences surging demand, driven by factors including the internationalisation of higher education and increased student mobility, key cities in Spain, Germany, and the UK are all seeing growing investments in Purpose-Built Student Accommodation (PBSA), with both international and local students fueling this trend.
However, as demand outpaces supply in key student hubs, challenges such as limited land availability and rising construction costs are putting pressure on developers and operators.
In Spain, for example, the PBSA market has seen substantial investment since 2018, with demand now outstripping supply in cities such as Valencia, where students are vying for every available unit.
Similarly, the growing demand from international students, particularly from Latin America and Asia, is adding a new layer of complexity to the market, especially in cities where local demand is already high.
As a result, PBSA operators are increasingly seeing strong occupancy rates, although the market is becoming more competitive as supply struggles to keep pace with this growth.
Moreover, the operational complexity of PBSA is also contributing to the challenges. While large operators benefit from economies of scale, smaller developers face difficulties in terms of both acquiring assets and managing properties effectively.
This is an especially acute issue for markets outside the UK, where the PBSA sector is still maturing. The requirement for high-quality amenities, flexible lease terms, and efficient property management practices is creating a learning curve for developers in markets such as Germany and France, where the concept of purpose-built student housing is still evolving.
Some panellists pointed to Spain as the current darling of the PBSA sector, citing the country’s ongoing supply-demand imbalance and high returns on investment. Spain’s top cities - Madrid and Barcelona - are seeing sustained demand, making them attractive to international capital.
However, other markets such as Italy are expected to grow significantly in the coming years as more investors realise the potential of the sector.
On the other hand, the UK market, despite being well-established, is showing signs of saturation. The pricing dynamics in the UK are becoming increasingly competitive, with rents pushing higher, particularly in high-demand areas.
This is creating pressure on returns, with some investors questioning whether the current levels of rent growth can be sustained in the long term. As a result, there is a shift towards value-add strategies, focusing on repositioning older assets or developing PBSA in markets that are not yet fully mature.
In Spain, for example, rents for PBSA have grown by 6-10% in recent years, leading to concerns about a potential reduction in demand from local students. This issue is exacerbated by the rising costs of construction, making it difficult to build new, affordable PBSA units that cater to the wider student population.
Operators are responding to these concerns by focusing on operational efficiency and ensuring that PBSA offers value for money. There is a growing recognition that the success of PBSA is not solely dependent on the physical asset but also on the ability to manage the property effectively, create a sense of community, and offer students a quality living experience.
This shift towards a more holistic approach to student housing is expected to be a defining feature of the PBSA market in the coming years.
◾ This article was first featured in the GRI Institute’s European Living Assets Outlook - access the full report below:
As the student housing market in Europe experiences surging demand, driven by factors including the internationalisation of higher education and increased student mobility, key cities in Spain, Germany, and the UK are all seeing growing investments in Purpose-Built Student Accommodation (PBSA), with both international and local students fueling this trend.
However, as demand outpaces supply in key student hubs, challenges such as limited land availability and rising construction costs are putting pressure on developers and operators.
Dormitory Demand
Cities such as Madrid, Barcelona, and Berlin are seeing a rise in PBSA investments due to their established reputations as student hubs, both domestically and internationally. However, the demand is not solely from international students; there is an increasing local appetite for PBSA in cities that historically focused more on long-term rental products.In Spain, for example, the PBSA market has seen substantial investment since 2018, with demand now outstripping supply in cities such as Valencia, where students are vying for every available unit.
Similarly, the growing demand from international students, particularly from Latin America and Asia, is adding a new layer of complexity to the market, especially in cities where local demand is already high.
As a result, PBSA operators are increasingly seeing strong occupancy rates, although the market is becoming more competitive as supply struggles to keep pace with this growth.
PBSA Pitfalls
As many cities in Europe struggle with limited available space for new developments, one of the key issues raised by panellists was the difficulty in acquiring suitable land in prime locations- and this is particularly true for developers and investors looking to establish new PBSA projects in highly competitive markets.Moreover, the operational complexity of PBSA is also contributing to the challenges. While large operators benefit from economies of scale, smaller developers face difficulties in terms of both acquiring assets and managing properties effectively.
This is an especially acute issue for markets outside the UK, where the PBSA sector is still maturing. The requirement for high-quality amenities, flexible lease terms, and efficient property management practices is creating a learning curve for developers in markets such as Germany and France, where the concept of purpose-built student housing is still evolving.
Key cities in Spain, Germany, and the UK are all seeing growing investments in PBSA (Adobe Stock)
Purpose-Built Particulars
Investors are becoming increasingly selective about where to place their capital in the PBSA sector. While Spain and Italy are seeing growing interest, Germany has emerged as a more challenging market, with significant capital flows concentrating on the core markets of Berlin and Munich.Some panellists pointed to Spain as the current darling of the PBSA sector, citing the country’s ongoing supply-demand imbalance and high returns on investment. Spain’s top cities - Madrid and Barcelona - are seeing sustained demand, making them attractive to international capital.
However, other markets such as Italy are expected to grow significantly in the coming years as more investors realise the potential of the sector.
On the other hand, the UK market, despite being well-established, is showing signs of saturation. The pricing dynamics in the UK are becoming increasingly competitive, with rents pushing higher, particularly in high-demand areas.
This is creating pressure on returns, with some investors questioning whether the current levels of rent growth can be sustained in the long term. As a result, there is a shift towards value-add strategies, focusing on repositioning older assets or developing PBSA in markets that are not yet fully mature.
Sustainability & Affordability
One of the more pressing concerns in the PBSA sector is affordability. Rising rents are becoming a concern in several European markets, particularly for local students who may not have the financial capacity to meet increasing rental demands.In Spain, for example, rents for PBSA have grown by 6-10% in recent years, leading to concerns about a potential reduction in demand from local students. This issue is exacerbated by the rising costs of construction, making it difficult to build new, affordable PBSA units that cater to the wider student population.
Operators are responding to these concerns by focusing on operational efficiency and ensuring that PBSA offers value for money. There is a growing recognition that the success of PBSA is not solely dependent on the physical asset but also on the ability to manage the property effectively, create a sense of community, and offer students a quality living experience.
This shift towards a more holistic approach to student housing is expected to be a defining feature of the PBSA market in the coming years.
◾ This article was first featured in the GRI Institute’s European Living Assets Outlook - access the full report below: