Investing in UK student accommodations is considered a reliable form of investment as the demand for higher education in the UK remains steady and the supply constrained, says consulting firm CBRE. For the third year in a row, investments in student housing broke through the £2 billion mark, reaching £2.37 billion in 2014.
Global property advisor CBRE recently released new research into the investment in UK student accommodation. Not only does this research show that total investment in student accommodation in the UK has broken the £2 billion mark for a third consecutive year, it also highlights that the profile of investors in student housing has shifted in 2014.
Total UK investment in student housing increased this year from £2.2 billion in 2013 to £2.37 billion this year. Of this, 35% is being invested in London property compared to 12% in 2013. “Increased activity in London can in part, be attributed to strong rental growth prospects due to constrained supply. Student housing is seen as attractive to investors as it offers relatively high yields compared to other Central London property and is available for a lower capital value per square feet,” explains Jo Winchester, Head of Student Housing Advisory at CBRE.
The research shows that the profile of the investors has changed considerably between 2012 and 2014. While in 2012, the biggest portion of money invested came from private equity organisations, followed by long leased institutions and sector fund retail, in 2014, these investments decreased significantly and new investment players took over. A big portion of the investments came from non-UK operators, direct let institutional investors, both barely present in 2012, with institutional investors, such as La Salle, Henderson, Blackrock and Pramerica, purchasing single assets of between £12million and £60million. “Institutional investors, who previously would only consider long leased product or indirect investment, have made a number of purchases of direct let, directly owned assets. This is a dramatic shift from 2012, when the direct let institutional investor hardly registered in the market,” says Winchester. “Now, with such a varied list of investors interested in this sector, UK student housing is arguably the most advanced of “alternative” assets, offering investors an “easy to understand” opportunity.”
As the number of new undergraduates is the highest ever for the 2014/15, investing in student accommodations is seen as a reliable form of investment. “This type of continuous, stable demand for higher education in the UK has led to student accommodation becoming a reliably performing asset class. With a number of portfolio deals currently available, 2015 promises to be another big year for investment,” concludes Winchester.