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18th Jul 2018
According to CBRE, the world's largest commercial real estate firm, student property in the UK achieved more than £2.37bn worth of transactions in March 2014 alone. In fact, March 2015 almost single-handedly broke last year's record £2.4 billion of investment - in a twelfth of the time.
Over the past few weeks two major deals have been secured - LetterOne have now officially paid £532m for the 2,150-bed Pure student housing; whilst Canada Pension Plan Investment Board have completed their acquisition of the Liberty Living student accommodation portfolio for £1.1bn. This effectively means that CPPIB have acquired 40 student developments with 16,700 rooms located across 17 towns and cities, making them the third largest owner of student property in the UK. LetterOne too are not far behind, as they have committed to an extra £140m in upcoming student properties.
Traditionally, commercial property investment has focused on retail, office and industrial spaces, but in the past three years student property has been catapulted into the mainstream sector due to high rental yields and an influx in investment. Yet unlike the traditional commercial and residential classes, the student property market is not concentrated to London, giving it a competitive edge. Regional university cities, such as Bath, Edinburgh and Leeds, have become hugely popular for investors, as they boast educational establishments that are popular with both domestic and international students.
Furthermore, the government's decision to remove the cap on university student numbers has also led to a huge demand for growth. In August 2014, a record breaking 396,990 UK students were accepted into universities - leading to an additional 30'000 places being made available, and it is forecasted that 60,000 more students will enter the system in 2016. In response to the UK's booming student population, property developers are fast building purpose built accommodation, and promising swift September completion dates ready for the stream of students entering higher education in 2015 and 2016.
Yet one of the most noticeable chances in the market has been the move towards luxury student accommodation (a trend driven mostly by international students, who seem to be more conscious of the quality of their bed linen rather than the quantity of their budgets.) Many developers have seized on this opportunity to offer quality accommodation with premium amenities, as higher tenant living standards can potentially lead to even larger rental yields.
Indeed, returns on investment within the alternative UK property sectors continue to climb, with the Wall Street Journal citing highs of 13.9% at the end of last year - who knows how lucrative the rest of 2015 will be.
18th Jul 2018
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