Student accommodation investment set to reach record levels

Around £4.8bn worth of student accommodation stock will be transacted by the end of the year as it continues to be an attractive asset for investors.

According to research from Cushman & Wakefield, based on current projections, a number of large portfolios could change hands by the end of Q4 2017 taking transactions even beyond this level.

In the first half of 2017, £2.41bn was transacted, a 24% increase on the equivalent period last year.

In a ‘mid-year snapshot’ of the UK student accommodation investment market, Cushman & Wakefield revealed there are currently 11,000 bed spaces being marketed to investors totalling £1.20bn. An additional £188m is also under offer.

The data also revealed that despite overall UK and EU applications for places at university being down for 2017/18 by 3.7%, non-EU applications rose by 2.2%.

Mike Mitchell, partner in Cushman & Wakefield’s student and residential investment team, said: “Across the UK, the Purpose Built Student Accommodation (PBSA) market continues to be one of the most attractive asset classes in real estate for investors. Despite applications to universities falling by 3.7%, the sector has witnessed year-on-year rental growth.

“Due to the value of foreign currencies against the Pound, there has been an influx of capital from overseas buyers in 2017 who are now competing with UK purchasers. Recent deals have seen investors from the Middle East, Singapore, China and Russia.”

Cushman & Wakefield is currently anticipating average headline rental growth of 2.9% between 2016/17 and 2017/18.

David Feeney, head of student analytics at Cushman & Wakefield, added: “More students than ever are demanding a bed in purpose-built accommodation. This, coupled with pressure on local housing markets, means that demand for purpose-built accommodation should remain strong. However, micro-market knowledge is essential to investment success.”

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