The amount invested in student accommodation in the UK in 2012 reached a record high of £2.7 billion in 2012, up 125% from the 2011 investment in this segment, as new research by property consultants CBRE showed. While the overall number of student in the kingdom has decreased, accommodation investments have been on a steep upwards trend for the past three years.
The new record is also eight times higher that the 2009 amount invested in student accommodation, the market analysis revealed. Last year’s biggest transaction in this real estate investment segment was the the recapitalization of University Partnerships Programme (UPP) Regional Portfolio. Barcap’s 60% stake in UPP’s assets, estimated at £840 million, has been recapitalized by Dutch pension fund manager PGGM.
‘Although the number of student applications and acceptances fell in 2012, capital committed to the sector has grown dramatically over the last 12 months,’ said Jo Winchester, head of Student Advisory, CBRE. ‘Our latest 2012 data shows that student housing is outperforming other asset classes by some margin, as it has delivered 9.6% total returns in 2012. This compares to 4.4% for all offices and 2.2% for all retail over the same period,’ she explained.
The specialist student funds and developers are expanding their domination of the student accommodation investment segment as they deploy larger amounts of money both within London and in other regions across the UK, improving the health of the overall UK market.
‘As an investment, 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,’ she added.
This new data clearly show an ongoing demand for student accommodation throughout the UK, a demand shown by both students and investors interested in a lucrative, counter cyclical asset class, Ray Withers, chief executive of property company Property Frontiers explained:
‘We have seen no let up in the volume of student property enquiries received in 2012 and are aware of the ever increasing numbers of projects being brought to market. Student property remains attractive as an investment where there is an imbalance between supply and demand but in some cities, supply issues are being met and so investors should, as ever, do their research and select the right place to invest.’