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Investment in Student Property Exceeded £3bn in 2016

Strong demand for purpose built student accommodation (PBSA) saw investment in the asset class exceed a total of £3bn in 2016, according to new research.

Student Property Investment

The report, compiled by estate agency Knight Frank, revealed that the total amount of sales transacted in the UK’s Purpose Built Student Accommodation (PBSA) sector, reached a total of £3.1bn last year - driven by a robust demand from both existing property investors and new entrants to the market.

 

While PBSA’s total spend in 2016 marked a reduction from 2015’s record-high £5.1 bn of investment, last year’s figure serves as an indication that demand for PBSA remains strong, said the firm, surpassing the levels seen both in 2013 and in 2014.

 

Furthermore, the report highlighted that investment in 2015 was boosted by a few exceptional purchases on large portfolios, carried by new property investors entering the market.

 

Portfolio acquisitions continued to be the largest source of equity in the PBSA sector last year, according to Knight Frank, accounting for circa 60% of the total investment volume.

 

Knight Frank predicts that this trend of bulk transactions will continue moving forward, remaining the largest source of investment in 2017, as both new and existing investors look to expand and consolidate their portfolios.

 

While 56% of investors in 2016 originated from the UK, the firm forecasts international equity to be the main source of the UK’s PBSA transactions this year, with heightened interest from North American private equity firms and institutions.

 

Commenting on the report James Pullan, Head of Student Property at Knight Frank, said:

 

‘We expect the market will increasingly be driven by the REITs and pension funds as economies of scale assist these institutional buyers to create increasingly large portfolios with efficiencies of operation, branding, and marketing’

 

On a separate update on the UK’s student property market last month, Knight Frank announced that student rents soared for the fifth consecutive year in 2016, with the average rent reaching £143 per week.

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