Global investors seeking student property opportunities

Global investors seeking student property opportunities

After the sustained high yields seen in the UK, student property investment has become a prominent mainstream global asset class.

Summary:

  • Investors all over the world will soon become more familiar with the advantages of student property investment
  • The purpose-built student accommodation investment model has been very successful in the UK, generating yields much higher than standard residential property
  • Similar supply and demand dynamics exist in other global territories

Student property investment is now recognised as a mainstream real estate asset on a global scale.

This is the conclusion of new research from Savills, which believes that sustained investment returns and clear supply-demand dynamics mean the asset can no longer be considered a specialist or alternative investment.

According to the international property consultancy, record levels of institutional investor activity are testament to its global potential as a mainstream real estate asset.

In the UK, where student numbers continue to rise and the supply of high-quality accommodation is very low, investment levels are set to near $7 billion. Investors want to add student accommodation to their portfolio because not only does it yield around 50% more than standard residential stock, but given that demand actually increases during economic downturns, the asset is seen as countercyclical and provides a low-correlation option.

Student property is a familiar asset to British investors, but the next few months and quarters will see the asset become increasingly well-established in a variety of countries. Investors and operators who are comfortable with the market may now seek to expand their purpose-built student accommodation model beyond the UK. New territories that could prove successful include wider Europe, Canada, Australia and the Middle East.

The report stressed: “The experience of university as an away-from-home phenomenon will ensure demand for student accommodation but the quality, cost and location of this demand varies significantly between institutions, cities and countries and needs to be understood by the pioneers who seek to develop new product.”

As with any asset class, investors always need to assess local markets, rather than rely on the average strength of the national market, paying particular attention to specific supply and demand factors.

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