A recent report from Knight Frank has highlighted some of the key global trends in student property at the moment, including growing demand for high-quality accommodation and rising investor appetite in the Asia-Pacific region.
Student property is a diverse and rapidly evolving sector that has experienced great change in recent years. Investors have more opportunities than ever before to benefit from the encouraging trends in this space, which is steadily developing from an alternative asset class into a mainstream market.
Some of the latest insights into current trends in purpose-built student accommodation (PBSA) have come from Knight Frank, which recently published its Global Student Property Report 2019. The research highlighted some of the defining aspects of the sector at the moment, ranging from the growing importance of accommodation as part of the student experience to the current strength of investor demand from the Asia-Pacific region.
Students expect more from the university experience
The provision of well-located, well-equipped accommodation can make a big contribution to the overall experience of people studying at higher education institutions.
Separate research from Knight Frank has indicated that, in the UK, the current development pipeline for purpose-built student accommodation is strong, with an additional 23,000 bespoke student rooms completed by the start of the 2018-19 academic year.
Developments such as Aura Student Liverpool – which boasts a range of desirable on-site facilities and an enviable location in the prestigious Knowledge Quarter, within a mile of five universities – provide an insight into the quality of housing available in some popular student cities at the moment.
According to Knight Frank’s latest study, students are becoming increasingly demanding when it comes to their university experience. This is particularly true of those travelling internationally to pursue their education, who “want to be in the right place, in good-quality accommodation with facilities and communities that add value to that experience”.
The firm referred to a survey conducted in partnership with UCAS which underlined the importance of housing in supporting student wellbeing.
James Pullan, global head of student property at Knight Frank, put some of the current trends and key themes in higher education into a political context. He noted that the temptation for some governments at the moment is to adopt inward-looking, populist policies.
“In stark contrast, higher education must remain outward-looking,” he stated. “Today’s best universities are built on the development of cross-border partnerships, the strength of academic networks and an ability to attract students from around the world. Accommodation is playing a greater role in supporting this, by helping create student communities.”
The interest in PBSA from investors all over the world, combined with the number of people travelling across borders to attend universities and colleges, has helped to turn student property into what Knight Frank called “an increasingly global asset class”.
During the last three years, cross-border capital accounted for 40 per cent of all investment into student accommodation, and the amount of international investment is expected to increase further in the coming years.
The Knight Frank findings showed that global investment into PBSA reached a record high of $16.3 billion (£12.8 billion) in 2018, up from $15.9 billion in the previous year.
As far as particular destinations are concerned, the US and the UK are by far the most mature global markets for student property investment, accounting for 56 per cent and 31 per cent of total global investment respectively in 2018.
When it comes to development activity and the standards of housing on offer to demanding students, there is no room for complacency in these markets if they want to retain their positions at the forefront of the global market.
Knight Frank revealed that other countries are starting to catch up with the US and the UK, with overseas investment into European student housing totalling $2.3 billion in the last three years. While this is still some way off the figures of $8.4 billion and $6.3 billion for the US and UK respectively, it represents a big increase on historic numbers.
Asia is also playing an increasingly significant role in the global student property sector, serving as a key source of outbound capital but also attracting more inward investment.
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Asian investor appetite for UK PBSA
Investors committed to UK student accommodation could see the Asia-Pacific region making an increasingly significant contribution to the development of the sector in the near future.
One of the key factors behind the growing appetite for PBSA from buyers in this part of the world is the fact that many of these investors are heavily committed to traditional asset classes in their home region. In the interests of diversification, they are looking at opportunities in other sectors and locations.
Knight Frank’s forecast is that the level of interest from Asia-Pacific investors in regional portfolios around the world will continue to increase. This could prove particularly significant for student property in the UK.
Emily Fell, the firm’s director of capital markets for Asia, said: “For institutional capital in Asia, PBSA in the UK represents a stable and recurring income which delivers attractive returns relative to traditional global assets classes. The sector is also viewed as having performed well during economic downturns.”
There is clearly great potential waiting to be seized in the British student property market, while the international picture for this asset class is becoming more dynamic and diverse with each passing year.
If you are currently considering opportunities in this sector and want to find out more about what the UK currently has to offer, contact Experience Invest today.
UK Student Accommodation Investment Guide
For more information about investing in this market segment, download the Experience Invest 2019 UK Student Accommodation Investment Guide.