Student accommodation investment set to reach record levels in 2017
Approximately £4.8 billion ($6.2 billion) worth of U.K. student accommodation stock will be transacted by the end of the year, according to Cushman & Wakefield.
“Across the United Kingdom, the purpose-built student accommodation market continues to be one of the most attractive asset classes in real estate for investors,” said Mike Mitchell, partner in Cushman & Wakefield’s student and residential investment team. “Despite applications to universities falling by 3.7 percent, the sector has witnessed year-on-year rental growth.”
Based on current projections, a number of large portfolios could change hands by the end of fourth quarter 2017, taking transactions even beyond this level. In the first half of 2017, £2.41 billion ($3.11 billion) was transacted, a 24 percent increase on the equivalent period last year.
Cushman & Wakefield said there are currently 11,000 bed spaces being marketed to investors, totaling £1.2 billion ($1.6 billion). An additional £188 million ($243 million) is also under offer.
“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 U.K. purchasers,” said Mitchell. “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 percent 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.”
