Money in mattresses

Small talk
Michał Obara, the managing director of Student Depot, tells us all about the current state of play in the burgeoning student halls sector in Poland

You’ve just re-joined Student Depot after a break of a few years. The market has changed a lot in this time, but how has the platform changed?

Michał Obara, the managing director of Student Depot: A great deal has happened in the company, but maybe I should begin with something that hasn’t changed. When I left Student Depot in 2018, we were the largest operator and owner of private student halls in Poland – and that’s still the case. For sure, today the company is far more professional. We have a team of over 40 people with nine operating halls, one under construction and another under preparation; moreover, we want to deliver another two new projects over this year. Our development plans are fully supported by Kajima Europe, the owner of the platform. Our first project, which we built from scratch in Wrocław, is very different from the student hall we handed over in Warsaw this year. The visible differences are in the amount of common space, the size of the rooms, and the way they are fitted out. We’ve learnt much about the standard of student halls and also about the quality of service. We don’t hire outside operators at Student Depot, and in this regard we are unique. We know we work for demanding customers – our fees are relatively high, so our students and their families have the right to demand the highest standards. Significant time and effort are needed to win them over and hold onto them.

But the competition in this segment is clearly intensifying.

Indeed, there are more investors and platforms around, but there are also more sites that can be used. Competition has a positive effect on everything – and this includes us, because we are all learning from each other in this relatively young market. There’s still a great deal of development potential in Poland, because only 1 pct of students are currently housed by private platforms. In the Netherlands, this figure comes to 9 pct, in Germany it’s 7 pct and in the UK it is as high as 21 pct. As a result, there’s still room in the market, not only for more projects, but also for more platforms. The arrival of new investors only confirms that the Polish market is attractive and is catching up with Western European countries, which in the long term will affect the valuation of such assets.

Why are private student residences such an interesting niche for investors?

People have been talking about the student accommodation market since 2016/2017. The format was intended as an alternative to other types of real estate, particularly since it has been growing well in Western Europe. Investors in Poland have engaged in various types of activities, but they have come to learn that this is a difficult asset class. Then the pandemic came along followed by the war in Ukraine, all of which was a reality check for the market. Some companies that had wanted to build offices, for example, have now given up on this, while others that were planning rental apartments, for which the competition is really fierce, are considering whether to move forward with their projects. As a result, investment opportunities have been emerging that have given added dynamism to the market. Student residence projects are particularly resilient when it comes to economic changes – they are always going to be required and their yields do not vary as much as, for instance, retail or office assets.

What new projects are you currently preparing? Are you also considering any refurbishments?

Currently, we have around 4,200 beds, which it has taken us ten years to build up. A decade ago, we started construction work on our oldest student residence in Poznań, and now we are developing another building just next to it, which we are planning to open for the 2025/2026 academic year. We have secured a site for our second project in Gdańsk and we are trying to obtain more land. We are also aware that cities like Rzeszów, Bydgoszcz and Kielce don’t have enough facilities of this kind, but these are more difficult markets, which is why we are concentrating at the moment on seven key cities – the main academic centres, where large numbers of foreign students are studying. As for refurbishments: in our sector they are difficult undertakings, mainly because they have to meet the expectations of the students – the number of buildings that can be given a second life is rather small.

And what was it like for you when you were a student? Did you live in a student hall?

I went to college in Kraków but I didn’t live in such accommodation, because I just didn’t qualify for it. This is still a very common situation at most public educational institutions. I had a lot of friends in halls and I would often visit them to study or socialise because that was always where the student life was centred. This had its pluses and minuses, because everyone needs a little peace and quiet as well as some privacy occasionally, and so back then it was a very difficult time to live in a student hall. They had their charms – with their bunk beds, wash basins in the rooms, shared bathrooms and endless queues in the corridors – but that was twenty years ago and today’s students have entirely different expectations.

Interview: Magda Rachwald