Italy’s Student Housing Market: A Fast-Growing Real Estate Opportunity
Rising Demand, Limited Supply: A Real Estate Investment Opportunity in Italian Student Living
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In today’s newsletter, we explore the student living sector, a fast-growing real estate investment class in Italy. While student housing is already well-established in the UK, the Italian market is just beginning to grow, offering unique opportunities for investors.
With both domestic and international student demand on the rise, this sector presents significant growth potential. Investors who act now could unlock substantial returns by capitalizing on these opportunities.
In this newsletter, we will cover:
Demand & Supply: Student Housing Expansion in Italy
Rental Values: Premium Pricing in Italy’s Top Cities
Market Operators and Operating Models
Challenges and Opportunities
Case Studies to Watch
Now, let’s dive in.
1. Demand & Supply: Student Housing Expansion in Italy
The Italian Purpose-Built Student Accommodation (PBSA) market is growing quickly, driven by a rising number of students. This increasing demand is currently unmet by both the private and public sectors.
Last year, the student population exceeded 1.9 million, a 5% increase. Major cities such as Rome (297,000 students), Milan (186,000), Turin (107,000), and Bologna (64,000) are at the forefront. Bologna, in particular, stands out, with nearly 50% of its students coming from outside the region, making it a key target for future developments.
The undersupply of student housing is significant. Italy’s PBSA provision rate sits below 4%, compared to over 30% in the UK. Currently, Italy has just 74,000 student beds, with 21,000 more expected by 2026. Yet, even with these projects, supply will still fall short of demand.
Investor Takeaway: The combination of a growing student population and limited supply makes Italy’s PBSA sector an attractive opportunity. Developers who can deliver modern, purpose-built accommodations are well-positioned to meet this unmet demand, especially in cities like Bologna and Milan.
2. Rental Values: Premium Pricing in Italy’s Top Cities
Due to the low supply of premium student accommodation, rental prices are rising, especially in key cities like Milan and Florence.
Milan: €1,420 per month for a single room in PBSA
Florence: €1,350 per month
Rome: €1,300 per month
Turin & Bologna: Slightly lower but still competitive
Premium PBSA units with high-quality amenities and locations near top universities are seeing strong rental growth. In Milan and Florence, free-market rent for PBSA units is around €850 per bed per month, while in Rome, it’s closer to €700.
Investor Takeaway: Rental values in cities like Milan and Florence highlight the potential for strong returns on investment in premium student accommodation. The demand for well-located, modern PBSA is driving rental growth, making this sector an increasingly attractive option for investors seeking stable income.
3. Market Operators and Operating Models: Key Players in Italy
The PBSA operating model involves various stakeholders. Typically, PBSA assets have an owner/investor and are operated by a third-party management company under a management agreement. It’s rare to see PBSA assets managed directly by the owner.
Italy’s PBSA market is becoming more competitive, with several key operators setting the pace:
Aparto (Hines subsidiary): Over 1,300 beds in Milan and expanding into Florence, focusing on high-quality living experiences for international students.
The Social Hub: Offers flexible living spaces combining student accommodation, co-working areas, and communal environments. They have properties in Rome and Florence.
Collegiate: Known for high-end offerings in the UK, they are expanding into Milan and Bologna, focusing on premium design and services.
These operators emphasize top-tier amenities such as gyms, study spaces, and social areas. They also offer all-inclusive rent packages that cover utilities and services, simplifying budgeting for students and adding value.
Investor Takeaway: Partnering with experienced operators like Aparto or The Social Hub can provide investors with a strategic advantage, ensuring high occupancy rates and premium rents. The focus on quality living environments helps PBSA stand out as a long-term investment opportunity.
4. Challenges and Opportunities: Navigating the Italian PBSA Market
While Italy’s PBSA market holds promise, investors face several challenges:
Undersupply: The provision rate remains under 4%, showing a clear need for more student housing. Cities like Bologna and Rome meet only about 17% of the demand.
Public Sector Competition: Many student beds in Italy are provided by the public sector at more affordable rates, competing for budget-conscious students.
Geographic Disparities: Opportunities for development are concentrated in cities like Milan, which is expected to reach a 10% provision rate by 2026, while Rome lags behind at less than 20%.
Despite these challenges, the demand for student housing far outweighs supply, especially for private, premium PBSA units. Investors who can navigate these hurdles stand to gain significantly, particularly as Europe’s investment environment begins to recover from recent economic pressures.
Investor Takeaway: The undersupply of high-quality PBSA creates a strong investment case. While competition exists from the public sector, the market for premium, well-located student housing is expanding, making this an appealing option for long-term investors.
5. Case Studies to Watch: Successful Student Housing Projects in Italy
Two recent projects illustrate the potential of Italy’s PBSA market and provide valuable insights into what types of accommodation and services are most in demand.
Case Study 1: Aparto Giovenale, Milan
• Investor: Hines
• Buyer: Italian Pension Fund
• Sale Price: Over €100 million
• Completion Date: Q1 2023
• Location: Near Bocconi University
• Operator: Aparto
• Highlights: This project transformed an outdated property into a modern PBSA with over 600 high-quality beds. Its proximity to a prestigious university made it highly attractive to investors.
Case Study 2: New-Build PBSA Scheme, Turin
• Investor: Patrizia AG
• Investment: €70 million (Forward Purchase)
• Location: Via Frejus, near Politecnico di Torino
• Highlights: This new-build PBSA offers over 400 beds and is strategically located near two major universities. It shows the growing interest in forward-purchase agreements, where investors commit early, securing long-term returns.
Investor Takeaway: These case studies highlight different investment strategies in Italy’s PBSA market, from repurposing existing buildings to investing in new developments. Proximity to major universities and a focus on quality are key factors driving success.
Conclusion: A Growing Sector with High Potential
Italy’s student housing market is expanding rapidly, driven by a growing student population and a major undersupply of PBSA. Though challenges exist, particularly regarding public sector competition and geographic disparities, the opportunities for private investors are vast, especially in cities like Milan and Turin.
Key takeaways:
Demand for high-quality student accommodation exceeds supply.
Low supply drives growth in premium rental values.
Competition among operators is rising, with new players entering the market.
The public sector is both a competitor and a potential partner in providing student housing.
That’s all for today.
See you next week.
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