Spain's large student population, the third largest in the EU, and the growing number of internationally mobile students are driving investments in the education sector.
In 2019, Permira bought Universidad Europea, a network of three institutions in Spain and two in Portugal for a transaction value of €770 million.
The same year, CVC Capital Partners acquired Spanish Universidad Alfonso X El Sabio for €1.1 billion, according to the national press, while KKR, acquired in 2020 MastedD, a leading vocational education provider in 2020.
Over the past five years international private equity capital has continued to flow into the Spanish education market with additional investments aiming to expand the existing portfolios and the education offering.
Investment activity is mirrored in the real estate market which is witnessing an increase in the number of education facilities. The growth plans of the country's main education providers are boosting project developments and leasing activity, especially in Madrid, following a similar trend to London where universities are becoming top-of-the-class office occupier.
The IE University inaugurated a vertical campus in 2021 with a capacity for 6,000 students and a surface area of 50,000 square metres. The campus is located in the heart of Madrid’s financial district, in the Caleido Tower, the fifth tallest building in the capital owned by Inmobiliaria Espacio.
In January this year, the Universidad Internacional de la Empresa UNIE opened a 6,777 square metres headquarters, in the capital’s central district Chamberi, in a newly refurbished asset delivered by the Spanish Reit Saint Croix.
The Camilo José Cela University will open a new campus in Madrid’s financial district next academic year. In a building owned by Royal Metropolitan, the campus will have a capacity for 2,500 students and 11,319 square metres.
CUNEF University will also have a new 17,841 square metres campus in Madrid, located in the Churruca Complex in the Ciudad Universitaria district, after reaching an agreement with the Spanish REIT Merlin Properties last year. The actual business park will be progressively refurbished until 2026 to transform it into one of the largest urban campus in Spain.
While many private education groups chose to rent, the private education group, CEU, acquired this year a new building in Madrid for €17 million to expand its university facilities.
Demolition and subsequent development work are scheduled to begin in the first half of 2023, with the aim of starting teaching activity in the 2025-2026 academic year. The new building will have more than 9,000 square metres to accommodate around 1,000 students.
Multiple real estate sectors, in addition to the office sector, are benefiting from the activity like the retail sector which has seen an increase in space demand from these types of tenants.
Activity is not only driven by private education groups but also by public institutions. The public Madrid Polytechnic University, UPM, presented last year “Campus for living cities”, a project which seeks to revitalise this university enclave in the south of Madrid. The project includes the development of different facilities such as a student residence, a research and innovation hub, sports facilities, green areas and so on.
The works, which will cover an area of more than 26,000 square metres, are expected to start in July this year.
The education sector is set to continue to require additional space as improving education and training is a priority in Spain to tackle unemployment and professional skills gaps.
While education groups benefit from growing student demand, the greater competition and the digitalisation of courses, require the development of modern and high-quality physical space.
The education sector is expected to keep momentum in Madrid. Though, there is potential growth for the real estate business linked to the education sector in other Spanish cities like Barcelona, Valencia, Málaga and Seville, cities that offer interesting opportunities in other related sectors such as the student housing market.