Total investment in UK student accommodation has broken the £2bn mark for a third consecutive year, according to new research from global property advisor CBRE.
Year to date figures show that £2.37bn has been invested into the sector over 2014, surpassing last year’s total of £2.2bn.
The profile of investors in student housing shifted in 2014, CBRE found, with institutional investors, such as La Salle, Henderson, Blackrock and Pramerica, purchasing single assets of between £12m and £60m.
Unveiling the research at the Property Week Student Housing Conference, Jo Winchester, head of student housing advisory at CBRE, said: “Institutional investors, who previously would only consider long leased product or indirect investment, have made a number of purchases of direct let, directly owned assets.
“This is a dramatic shift from 2012, when the direct let institutional investor hardly registered in the market. Now, with such a varied list of investors interested in this sector, UK student housing is arguably the most advanced of “alternative” assets, offering investors an “easy to understand” opportunity.”
Investment in London student housing increased in 2014, the research said, with 35% of the £2.37bn invested so far being deals in London property. This is an increase from 2013 when deals in the capital contributed to 12% of the total.
Winchester continued: “Increased activity in London can in part, be attributed to strong rental growth prospects due to constrained supply. Student housing is seen as attractive to investors as it offers relatively high yields compared to other Central London property and is available for a lower capital value per square foot.
“However, operationally, the London market can be tough to get right. Our Student Housing Index shows only 1% net rental growth from each of the last two years and, unlike virtually all other property asset classes in the UK, student accommodation is attracting significant investment in the regions, partly because of stronger opportunities for rental growth.”