April 10, 2013

UK student accommodation investment doubles in past year

Despite declining numbers of students, investment in UK student accommodation more than doubled last year.


According to leading commercial property firm CBRE, investment in the sector increased by 125% from 2011 to 2012. Despite a decline in the number of university applicants for 2012-2013, a record £2.7bn was invested in 2012.


“The student accommodation market is dominated by specialist student funds and developers, who are deploying large amounts of capital in the regions as well as within London, making student accommodation a healthy sector nationally,” said Jo Winchester, head of student advisory at CBRE.


“Although the number of student applications and acceptances fell in 2012, capital committed to the sector has grown dramatically over the last 12 months.’’


These latest figures reinforce the recent trend for a rise in investment in student accommodation. In the past three years it has risen sharply despite the worst financial crisis since the 1930s. There was a 124% increase in investment in student accommodation from 2010 to 2011, followed by a 53% increase in 2012.


Demand for investment in student housing in the UK is strong, both in London and particularly regionally, where investment has outpaced London in both 2011 and 2012.


This is undoubtedly due to the fact that, according to CBRE, “Student accommodation is relatively low risk and provides a secure income. Occupancy levels remain high, especially when compared to the vacancy rates in some mainstream sectors, and most university towns remain undersupplied.”


Student accommodation is strongly outperforming all other property asset classes and last year it delivered total returns of 9.6% for investors. This is significantly higher than the 4.4% return for all office properties and 2.2% for all retail properties reflecting a positive outlook for UK student accommodation investment in the current market.


Student accommodation investment is a clear front runner in terms of property asset classes.