Investment Booms in Student Accommodation?

Private equity firms are ramping up their investments in the UK’s student accommodation market, pumping hundreds of millions of pounds into a resilient sector, with an eye on high rental returns in post-Brexit, post-Covid Britain.

Recent research from real estate advisors, Jones Lang Lasalle reveals that one-third of deals for student property in 2021 so far have been financed by private equity, compared to about 15 per cent in total between 2016 and 2019.

With student application numbers projected to rise by 8.5 per cent this year and purpose-built accommodation over subscribed, property remains attractive for private equity firms. They are sitting on more than $300 billion for property investments alone and want to broaden their assets beyond offices, retail and hotels — all badly hit by Covid-19.Private equity investors now own 55,000 student beds, according to a Jones Lang LaSalle analysis of the top ten biggest landlords across the sector. That’s equivalent to 8 per cent of the U.K. total.

Research from student accommodation provider Unite Group Plc reveals that the sector requires a further 310,000 beds to cater to all first year and international university students, who typically live in purpose-built accommodation. Construction is currently failing to make a significant dent in that gap.

According to The Mistoria Group, investor enquiries from student accommodation has surged over the last six months, up 23 per cent from UK and international investors.

Mish Liyanage, managing director of The Mistoria Group, said: “Without doubt, the student rental market is the most financially lucrative for investors if it is managed well.  However, if landlords fail to keep their finger on the pulse of an ever-evolving marketplace, they can easily fall into the trap of not planning properly, or using an inexperienced agent, which may leave them with costly void periods. Since 2011, student accommodation has outperformed all other traditional property assets and has been the strongest-growing investment property market in the UK.  It has also continued to be one of the most resilient investment sectors, with rental incomes and property values remaining stable, or increasing.  The attraction of the student accommodation sector has been driven by structural undersupply and positive rental growth year on year.”