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Capitalizing on Portugal's student housing shortage

3 MIN READMay 09, 2019
The opportunity for student accommodation in Portugal is “huge”, says Ricardo Kendall, serial entrepreneur and founder of micro-apartment developer and operator Smart Studios. Kendall points out that in Lisbon alone, there is a current shortage of 10,000 beds for students. However, that opportunity has not gone unnoticed. The two largest student housing operators in the world, US-headquartered Greystar and UK-headquartered GSA, may not have a presence in the country, at least not yet, but Kendall estimates that there are still more than 10 players who have bought plots or started construction in Portugal: “So I believe that in three or four years’ time, we will have a good offer of more than 5,000 beds in Portugal.”

At present, the leader in Portugal’s student accommodation market is Collegiate, the UK-headquartered operator of top-end, luxury student accommodation. It has a 330-room building in the heart of Lisbon, the Collegiate Marquês de Pombal, complete with swimming pool, sauna and a laundry service.

Smart Studios claims to be second largest provider in Portugal, with 200 apartments operational: a 40-apartment building in Coimbra - a medieval ‘student city’ in central Portugal, home to the ancient University of Coimbra (founded in 1290) - and the rest in Lisbon. The firm is also working on completing a development in Lisbon of around 114 apartments and has a further 345 apartments under construction, including a 300-apartment project in Carcavelos, on the outskirts of Lisbon. The project is expected to benefit from the presence of the Nova School of Business and Economics (which recently moved from Campolide, Lisbon to its striking new campus in Carcavelos) and also from the imminent relocation of the NATO Communications and Information Agency (NCIA) Academy, from Latina in Italy to Oeiras in Portugal, neighbouring Carcavelos.

In December 2018, Kendall sold 45% of Smart Studios to LX Partners. The plan is to continue using the company’s capital to fund the acquisition of land plots, whilst using bank leverage to fund construction. Smart Studios is concentrating its future efforts on Lisbon and Porto, where it has bought plots to develop 530 and 240 apartments respectively reaching 1500 studios in the next couple of years.

Hybrid, affordable, defensible strategy

Smart Studios’ apartments are not dedicated exclusively to students, but are a hybrid between student accommodation and co-living. “We don't choose if we receive tenants who are students or non-students,” explains Kendall. “Our strategy is to maintain a hybrid offer. I don't know if in 10 years time students will be going to university, studying at home, or going to university every few weeks, or something like that. So I think it's better to have a mix between students and non-students.”

The mix of student/non-student tenants is fairly even and Kendall says that it works out well in practice. “University students and young professionals are almost the same age. They have created WhatsApp groups in all the buildings and they tend to do things all together.”  

Another key strategy for Smart Studios is affordability. “We charge between €500 and €600 per month, which is a quarter of the average in London, and more affordable than Collegiate, for example,” continues Kendall. “We believe that when the markets mature, it will be better to be in our position, because rents may be lower and taxes may be higher. Being one of the cheapest and trying to maintain the occupancy rate is our main strategy.”

Portugal’s foreign student influx
 
The need for student accommodation is linked, invariably, to the success of the relevant education institutions. Portugal’s universities went through a crisis in previous years, observes Kendall, suffering decreases in student numbers. But universities are now doing better thanks in large part to an influx of foreign students: “Foreign students have been increasing at a rate of around 25% per year, even as the intake of Portuguese students has been decreasing. A lot of courses are now being taught in English. Portugal is also in vogue - people like to be here and it’s probably cheaper than being back home.”

Kendall points to the example of Nova: “Nova is a Portuguese university but, in the European ranking of business schools, it's better qualified than any other business school in Germany. It attracts a lot of German students and the very best German companies, like Mercedes and Bayer, come here to recruit.”

“Business schools are doing well and traditional universities are getting better - all of them are investing and trying to attract more and more foreign students,” continues Kendall. “Foreign students come here and I think they like Portugal. They are bringing a new life to the universities.” 

Student housing will be discussed further at Portugal GRI 2019 on 21-22 May in Lisbon and at Europe GRI 2019 in Paris on 11-12 of September.
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