Student Housing in Poland – a new horizon?

Whilst international political bickering and introduction of tariffs elsewhere in the world begs questions about the future world order, Poland continues its own journey forward unabated and with a progressively more mature and stable economy and clear vision of itself. A decade after the economic crisis and with retail and office sectors now well-established as well as a rising popularity in warehousing and distribution, there is a new focus on the broader residential sector – not only the private rental sector (PRS) but also purpose-built student housing accommodation (PBSA).

Poland playing economic catch-up

Although Polish demographics show an ever-so-slightly shrinking population currently teetering above 38 million, almost all other socio-economic factors for Poland are positive. Unemployment figures of below 4% and historic all-time low interest rates of 1.5% demonstrate how far the country has come since 15 years ago when roughly one in five were out of work and interest rates were above 5%. Over the same period average salaries have all-but tripled with the current average salary tipping the equivalent of 10,000 EUR per annum – still relatively low compared to Western European counterparts but also in itself a huge step forward and a large part of the country’s competitive advantage. S&P (A-) and Moody’s (A2) both forecast a stable outlook for Poland whilst inward investment continues to appear from even further afield with interest from the Middle and Far East as well as the US now competing with more traditional investors from Western Europe. 

Whilst much can be said for Special Economic Zones and tax-breaks aimed at luring foreign capital, if the truth be known Poland’s real asset is it’s workforce. A blend of discipline, work ethic and attention to detail that many major foreign employers in particular praise as reminiscent of belonging to previous Western generations of workers has perhaps not been the driving force behind the decision of multi-nationals to set up in Poland but more often than not has been the overriding reason for them to stay and expand. Poland’s universities are the engine-room churning out the well-educated, multi-lingual workforce that are the source of national pride and the envy of many in so-called more developed states. “Poland has a very young demographic profile, and the education level is very high,” noted Scott Newman, Senior Vice-President of State Street Bank in an interview explaining the success of the company’s growth to over 4,000 staff in the country.

A new trend afoot – purpose-built student accommodation…

An increasing number of students are enrolling full-time at the expense of part-time university programmes whilst there is a huge influx of foreign students flocking to Polish higher education establishments who often benefit from a lower cost-base for their time at university whilst still being able to follow an English-led syllabus. Previously ‘foreign students’ tended to be from the larger Polish diaspora but statistics show that nowadays a rapidly increasing number of students with no previous links at all to Poland are seeking to enrol. With most recent figures showing over 70,000 foreign leavers from Polish universities and applications from abroad growing by over 10% per year, it is forecast that the number of overseas attendees will exceed the significant milepost of 100,000 soon after 2020. Over 50% of foreign students come from Poland’s Eastern borders – namely from Belarus and Ukraine – but there are growing numbers emanating from Southern European countries such as Italy, Spain and Turkey whist the most popular cities in which foreign studies come to study are by far and away Warsaw and Krakow.

A large proportion of the foreign students and an increasing proportion of more discerning local students are not content to accept below par student digs and a new market is opening up in the form of purpose-build student accommodation in Poland’s major cities. Traditionally the majority of student accommodation have been in the public domain in unpopular dormitory-style facilities with shared washing and cooking facilities and whilst there is a major price differential between this standard and the newly-appearing privately-owned student houses, current occupancy results show that there is enough demand from aspiring students to absorb many more private initiatives.

From an investment perspective the only portfolio of size to show an exit so far concerns the purchase by Japanese investor, Kajima, of Oaktree’s interest in Student Depot where co-investor Griffin continue with their minority share. Already offering around 2,000 beds across 5 sites in Warsaw, Poznan, Lublin, Wroclaw and Lodz, Student Depot is currently the largest player on the market and continuing to develop with Krakow and Gdansk also on their radar. Other players on the market include Golub GetHouse, Basecamp and Gent Holding who amongst them also cover the capital and major regional university cities. Other large international players are circling or dipping their toe in the water such as Catella via their Trio project in Krakow city centre on ul. Rakowicka launching in the first half of 2020 which features almost 300 units in all of which nearly 150 are more traditional PRS apartments in two separate buildings for long-term rent whilst another standalone building contains almost 140 student housing rooms. Even pre-launch, Leach & Partners who are mandated to let and property manage the scheme for Catella, were already excited about the level of interest both in the private rented sector part of the scheme as with the student housing building.

When it comes to students’ preferences, whilst location is unsurprisingly a key consideration, the availability of amenities on-site such as a fitness area, convenience store, café and laundry are of high importance for today’s undergraduates whilst there is also a strong desire where possible to have private rooms rather than sharing and to be billed monthly for an ‘all-in’ experience covering not only rent but also utilities and wi-fi. Double-rooms in private academies are priced typically at circa 2,000 PLN per unit per month whilst larger single rooms can even reach this level whilst starting from even below 1,500 PLN per unit per month.

Certainly it is early days for Poland in terms of the fledgling PBSA market but all indicators thus far point to it becoming as important a sector in Poland as it has become in the UK and other Western European countries. Barring any new major economic correction, it can be expected that it will become an important inflation-protected and anti-cyclical asset class over the next decade.