UK student accommodation market to hit £6 billion?

UK student accommodation market to hit £6 billion?

Investment in purpose-built student accommodation (PBSA) in the UK is set to soar to £6 billion, with demand continuing to outstrip supply.

Summary:

  • £4.5 billion has been invested in the UK student accommodation market, with an estimated £6 billion expected by the end of the year
  • With £2.7 billion invested into the sector in 2014, the past year has seen that value more than double
  • The increase in students, particularly those from overseas, has seen the demand for PBSA outpace supply

Investment in the UK student accommodation market has reached a record £4.5 billion in 2015 and could reach £6 billion by the end of the year.

This figure eclipses the one seen in 2014, when £2.7 billion was invested into the sector, the research by Cushman & Wakefield shows.

The most investment activity has been seen in portfolio sales this year, with sales triggered by a range of factors including distress, profit taking and portfolio reconstruction.

Mike Mitchell, Senior Director in Cushman & Wakefield’s Education Team, said: “This has been a ground-breaking year for the UK student accommodation sector. It is thriving, with liquidity driving investment volumes higher than ever before. Residential facilities play a crucial role in attracting students, now subject to £9,000 a year tuition fees, who have decided they should have a quality residential experience that supports their academic and social experience.”

Supply of purpose-built property has grown sharply and reached a peak of more than 539,200 beds in 2015, up by 19,300 on 2014. Room numbers are expected to grow at a healthy rate, but rents have also risen by 6%, illustrating the continued undersupply in the market.

The ongoing supply-demand imbalance is due to the increase in full-time students in the last decade, which has increased from 61% to 74%. The total number of international students, a group who favour privately rented student accommodation, has increased by 36.8% and totalled 436,000 in 2013/14.

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