Corporate investors are still backing the student housing sector by ploughing a record £2 billion in to university halls in the first nine months of the year – a 145% increase over last year.
This record investment is despite rising tuition fees in England and falling numbers of students, which the men in suits regard as a blip in the market, says a third quarter student investment report from property consultants CBRE.
Three notable trends are emerging –
• Investment focus is switching away from London with more than half the cash going to regional university cities
• 90% of the money is going in to investment rather than development – so more halls are changing owners as development cash is harder to raise from bank
• Deal sizes are increasing – this year has seen five transactions over £100 million against the largest deal of the third quarter last year of £85 million
Jo Winchester, Head of Student Advisory at CBRE, said: “Total returns remain a key driver for investors, as they flock towards the impressive returns given by student accommodation for a second year in a row.
“Our data shows that student accommodation is outperforming other asset classes by some margin, as it has brought 9.6% returns in the year to September 2012. This compares to 5.4% for all offices and 2.2% for all retail in the year to August 2012.
“The market is dominated 90% to 10% by investment deals, as the development market continues to suffer from funding constraints.”
The firm confirms investment interest in student letting is not waning, although student numbers are down due to fewer deferring from last year, fewer with AAB grades, and changing demographics.
“The student accommodation market remains attractive to domestic and more recently international investors due to the higher achievable total returns compared to traditional property asset classes, and as reported, consistently high occupancy levels across all operators for the 2011/2012 academic year averaging over 90%,” said Winchester.
