Investment in UK student accommodation topped £2 billion last year, according to a new report from CB Richard Ellis (CBRE) which indicates that student property is driving the country’s investment market.
It is the second year in a row that the milestone has been reached, with the official total standing at £2.1 billion for the 12 months to December 31st.
The study highlighted that student accommodation was strong across the whole of the UK, unlike some other investment markets, with 88 per cent of the £2.1 billion being invested in regional schemes across 30 different towns and cities outside of London.
Investors are exhibiting particular interest in areas such as the north-west, the Midlands and Wales, thanks to large-scale opportunities that promise high yields and strong rental prospects.
The trend for overseas investors to dominate the UK student accommodation market was sustained last year after impressing in 2012; in the last two years, overseas buyers have gone from representing 23 per cent of total investment to 52 per cent.
A significant degree of interest is emanating from North America, where investors such as the multi-family and student housing operator Greystar are expanding their reach – something highlighted by the purchase of a £310 million asset portfolio from the collapsed Opal Group.
In the coming months and years, investor appetite for student accommodation will continue to grow, due to the “structural undersupply” across UK towns and cities, explained Jo Winchester, head of student housing advisory at CBRE.
Furthermore, despite changes to tuition fees and other factors creating “uncertainty” in the letting market between 2012 and 2013, new UCAS figures indicating that higher education entries are at their highest level ever bodes well for investors.
“This has resulted in consistently high occupancy rates in purpose-built student accommodation, making it a stable and lucrative sector for all categories of investor, including a growing number of international investors,” she explained.
As the number of buyers increases and “competitive tension” around deals escalates, CBRE predicts significant yield compression for direct let properties over the rest of the year.