UK student accommodation investments ramp up

on Jun 16, 2015

Student accommodation investment in the UK is picking up pace, with more than £671 million of deals agreed on Monday alone, The Independent has reported today.

Guernsey-based International Mutual Fund has put up for sale a 5,507-bed portfolio encompassing buildings in 12 university cities including London, Manchester, Oxford and Edinburgh, which is projected to generate as much as £37 million in rental income for the 2015-16 academic year.
The sale is being handled by real estate agency Knight Frank and aims to bring in more than £400 million.
Meanwhile, Unite UK Student Accommodation Fund said on Monday that it has agreed to buy eight properties from Ahli United Bank for £271 million. The properties include 2,100 beds in London, Glasgow, Leeds and other university towns and cities.
“Student accommodation is undersupplied in the UK,” James Pullan, head of student property at Knight Frank said. “We anticipate interest from all four corners of the globe into a sector that offers exposure to UK residential and higher education asset classes.”
Student accommodation based land and assets investment during the first five months of 2015 was valued at £4.2 billion, higher than any previous year and almost double the £2.5 billion for 2014, Savills said last week.
The real estate agency also expects total investment in the sector for 2015 to reach £5.5 billion, highlighting significant interest from overseas investors.
The explosive growth of student accommodation in the UK is driven mostly by the government’s decision to remove the caps which limit the number of students that universities can recruit.
Indeed, nearly half of English universities plan to expand intake over the next five academic years, some by as much as 50 percent, The Guardian reported earlier this year.
“There are lots of lenders out there who feel British higher education is a good secure bet to invest in,” David Willetts, former Conservative universities minister said as quoted by The Guardian. “Obviously if an individual university messes up and has poor quality provision and a bad reputation they may find themselves with a white elephant. Then that’s their responsibility. But overall the background is growth.”

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