Student numbers rise in France as higher education property attracts investment

Student numbers rising

In the European Union there were 16.8 million students enrolled in higher education in 2019, an increase of 500,000 students in five years. This figure is made up of a significant proportion of international students, a population that has increased dramatically since 2010 (+71% in 10 years).

While geopolitical and economic factors explain the appeal of the European Union, the teaching quality, the reputation of its educational institutions and the many programmes facilitating international exchanges (Erasmus for example) continue to attract students. 

In 2019, there were 2.73 million students enrolled in higher education (public and private) in France, a quarter of which were in the Greater Paris region. The increase in enrolment is particularly significant in certain academies (Nantes, Versailles, etc.) and has continued in 2020 (2.78 million) and in 2021 (2.81 million) due to exceptional baccalaureate success rates that allow students to study and university level.

Hybrid learning

Thanks to the significant adoption of new teaching tools, learning is now open to a wider public, available at any time and at the pace of each individual. The option of online learning can therefore help schools with limited space and growing enrolments to better control their growth.

In France, after the lockdown periods due to the health crisis, 100% online learning is no longer on the agenda. This is evidenced by the survey conducted by the Fédération des Etudiants Francophones (FEF) among more than 7,700 students at the end of 2020, which revealed that 60% of them had developed feelings of disengagement and wanting to drop out.

The impact was also felt by teachers due to fatigue, weakened relationships with students and other factors. Physical premises are therefore more necessary than ever for schools: in addition to anchoring their brand in a physical space, campuses encourage social interactions and form an integral part of learning.

The lettings market

The number of leases or acquisitions of premises by higher education institutions has increased in recent years in the Greater Paris region. While these only account for a limited proportion of all commercial space lettings, their volume has nevertheless increased significantly.

In total 79 transactions over 1,000 m² have been recorded since 2016 in the Greater Paris region representing a volume of 286,360 m², including:

• 2020: 49,310 m²
• 2021: 61,920 m²
• 2022: 20,620 m² as at the end of February

More than 16 transactions exceeding 5,000 m² have been recorded in the last five years, whereas none had been recorded in the previous five years. Among the most significant deals of 2021, EM GRENOBLE let a 6,000 m² building in Pantin, in the north-east of Paris while INSEEC let 13,500 m² in La Défense business district.

Paris remains the focal point of the vast majority of transactions with 57% of the total number of leases >1,000 m²in the Greater Paris region since 2016 and 52% of the total volume. These transactions are mainly on the Left Bank, the traditional location sector for higher education.

Therefore, South Paris makes up 71% of the volume of leases >1,000 m² recorded inside Paris itself, ahead of North East Paris (25%). However, we have seen an increasing number of transactions outside of Paris in recent months, particularly in the western part of the Paris region including La Défense, Neuilly and Boulogne, and in the Northern Inner Rim (Saint-Ouen and Clichy).

The investment market

Since the beginning of the health crisis, the growing interest of corporate investment in schools has increased, as shown by the completion of several transactions. For example:

• In 2020 SWISS LIFE bought 34 rue de Fleurus in the 6th arrondissement
• In 2021 LA FRANÇAISE bought the new EM Grenoble campus in Pantin
• In Q1 2022 AEW acquired “H2B” building, the new campus of EM NORMANDIE in Clichy for €150 million.

Higher education property allows investors to diversify their assets while meeting ESG requirements, as many schools are favouring energy-efficient premises. With little dependence on economic cycles and benefitting from the increasing enrolment rate, schools are benefitting from their status as a safe investment (long leases, solid tenants, etc.), in contrast to the uncertainty surrounding the future of other asset classes.

The growing interest of investors in schools is reflected in the fact that dedicated funds are now being created for them. For example, QUAERO CAPITAL recently announced the launch of the first property fund exclusively dedicated to educational property, with the aim of building a €200 million portfolio of 15 to 20 assets in France.

The favourable environment, rise in the rental market and the increasing appeal for investors makes the higher education property sector in France an attractive proposal.