Research - MAY 10, 2017

U.K. student housing transactions to increase 17% in 2017

by Andrea Waitrovich

The U.K. student housing market performed well in 2016, according to Savills. Investors traded 68,000 student beds worth £4.5 billion ($5.8 billion) last year. In 2017 Savills expects 75,000 beds to trade for £5.3 billion ($6.9 billion), a rise of 17 percent year on year.

2016’s performance was slightly lower than the record set in 2015, which saw more than £6 billion ($7.8 billion) of student housing change hands. However, the volume traded in 2016 was still 54 percent higher than the average for the past five years.

Many more of these deals took place in the second half of the year, as investors opted to wait for any market movement following the outcome of the EU referendum.

The investor appetite for student housing assets has outgrown the supply of available stock. Of the £4.5 billion ($5.8 billion) traded in 2016, £1.1 billion ($1.4 billion), or 25 percent, involved forward-funding developments, while £223 million ($288 million), or 5 percent, were development sites. Existing stock made up 69 percent of trades, the lowest proportion on record.

U.K. student housing continues its evolution into a global investment market. The proportion of international investment flowing into the market has almost doubled in the past two years.

Foreign investment grew from 35 percent of transactions in 2014 to 64 percent in 2016.

There was a huge increase in Singaporean investment in 2016, up to almost £1.2 billion ($1.6 billion) from just £35 million ($46 million) the year before. Almost two-thirds of this came from just one investor, a joint venture between Singaporean sovereign wealth fund GIC and GSA, which acquired more than 7,000 beds.

Another Singaporean fund, Mapletree, also invested heavily in U.K. student housing last year. They acquired over 6,000 beds.

North America was the second-largest source of capital into U.K. student housing in 2016, investing more than £1.3 billion ($1.7 billion). The vast majority of that came from two Canadian investors: Brookfield SRE and CPPIB.

Savills listed three new U.K. markets for 2017 as top cities for student housing development: Exeter, Guildford and Leeds, which had continued strong demand demonstrated by their success in attracting new students alongside limited supply, making these cities particularly attractive for new student housing development.

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