Investors target student housing sector
THE Scottish capital and St Andrews have been named in the list of top destinations for investors looking to develop purpose-built student accommodation (PBSA) this year, research by Savills has revealed.
The company also said it expects that a record number of new investor groups to enter the market in the wake of Lone Star, Crosstree, Barings, Brydell Partners, Ares, and Franklin Templeton who have all made their sectoral debuts since early 2020.
Savills said the new investors are likely to target university cities with a strong reputation and with a clear supply and demand imbalance of beds, such as those topping its development league table.
The real estate advisor said such accommodation is in a strong position to bounce back as lockdown restrictions ease, adding application data from 2021 shows an 8.4 per cent annual rise in university applications, driven by a 17.1% increase in applications from foreign, non-eu countries. According to Savills latest research, Bath, Birmingham, Brighton, Edinburgh, London, Manchester, Oxford and St Andrews top the list for those looking to develop PBSA. The countries with the greatest growth in applications are also those most likely to demand PBSA.
There were 130,000 university applications from Chinese students in 2021, who are more 2.2 times as likely to live in PBSA than domestic students. Applications from the US rose 60.7% year on year; American students are 1.9 times as likely to live in PBSA than students from the UK.
At £5.77 billion, 2020 was a record-breaking year for investment in UK PBSA, a 5.7% increase on 2019, according to Savills.
Excluding Blackstone’s £4.66bn acquisition of iq Student Accommodation from Goldman Sachs and the Wellcome Trust, 98% of investment was into single assets and 60% of the volume in 2020 came from overseas investors. Savills said that the
breakdown shows that international investors remain confident in the UK’S higher education sector and its continued appeal to students from all over the globe.
James Hanmer, head of UK PBSA investment and co-living, Savills, said PBSA yields have remained stable at
4.75% for prime regional cities, supported by more stringent rent guarantee structuring.
“This yield stability reinforces why investors are attracted to PBSA, for the long-term income streams it provides, demonstrating the maturity of the asset class,” he said. “There is no perception of longerterm structural issues in demand for UK higher education.”