Investment in UK student accommodation is set to top last year’s levels despite a fall in university applications, according to Cushman & Wakefield’s latest forecast.
The firm predicts that deal volumes will total at least £4.8bn this year, up from £3.86bn last year, and that a number of potential portfolio deals could even push volumes beyond the record £5.7bn posted in 2015. In the first half of this year, £2.4bn of assets changed hands, 24% more than in the same period last year.
“Due to the value of foreign currencies against the pound, there has been an influx of capital from overseas buyers in 2017 who are now competing with UK purchasers,” says Mike Mitchell, partner in student residential investment at Cushman & Wakefield. “Recent deals have seen investors from the Middle East, Singapore, China and Russia.”
UCAS data shows that the number of university applications fell by 3.7% this year and that an increase in interest from non-EU students had failed to make up for a fall in applications from the EU and the UK.
However, falling student numbers are doing little to dampen rental growth. For the coming academic year, average headline rents are expected to increase by 2.9%.
David Feeney, an associate in Cushman & Wakefield’s student accommodation advisory team, says rents are continuing to rise because of years of undersupply and the increasing popularity of purpose-built stock.
“At a macro level, the market remains structurally undersupplied and overall applications for places are up 31% over a 10-year period,” he says. “There remain more than six applications made for each place at university and more students than ever are studying outside their home regions.
“Further, wider market trends show that purpose-built accommodation is an increasingly popular choice for today’s students – the number of them living in private sector purpose-built accommodation grew by 68% between 2010-11 and 2015-16.”
Although the prospect of Brexit appears to have affected applications from EU students, Feeney is optimistic that “the international reputation of a number of UK institutions as world-class centres of learning means their appeal will remain.”