Birmingham student housing market comes of age

Birmingham has been highlighted as a major hotspot for student housing in the UK, as the city’s market comes of age.

A record number of student beds are in the development pipeline, with major assets changing hands, reports CBRE. Indeed, the city has granted planning permission for more than 3,200 new student beds across 24 developments, ranging in size from 33 to 625 beds.

Furthermore, 2016 has kicked off with two deals in the city – Salt Holdings’ £11m sale of The Pavilion, Five Ways, to a private buyer and Arlington Investors’ acquisition of Sanctuary Students’ 656 bed campus on Bagot Street, Aston, and adjacent development site with consent for 534 beds.

Aston University’s Student Village is currently on the market (3,000 beds) with a £200m price tag and has attracted “widespread interest”.

“Strong investment volumes during 2015 and into 2016, together with a robust development pipeline, demonstrate that student housing is now a maturing asset class in this city,” says CBRE.

“This sale will also provide clarity on where yields for large single regional assets are headed,” comments Rosie Young, Associate Director in CBRE’s Specialist Markets team, Birmingham.

More than £5.5 billion of investments changed hands in 2015, according to the firm, compared to £2.2 billion in 2014, making student housing a mainstream investment option.

Student property investment hits new record high

27th October 2015

Investment in UK student property has hit a new record high, as increasing demand to study in the country is matched by rising interest from both domestic and overseas investors.

In the first half of 2015, investment in the student housing market hit £3.98 bllion, according to CBRE, well ahead of the £2.35 billion recorded in the whole of 2014.

Now, new figures from Savills show that the trend has continued in the second half of 2015, with investment volumes reached $6.5 billion in the first three quarters of the year, a new record high. Indeed, total investment in the UK’s sector overtook the US for the first time, notes the advisor, with America racking up just $3 billion across the first nine months of 2015.

In fact, North American investors helped to fuel growth in the UK student property market: the continent was the source of 80 per cent of all cross-border deals in the year to September 2015.

Paul Tostevin, Associate Director of Savills World Research, comments: “Reflecting the maturity of the UK market, the major transactions have all been portfolio deals.

Indeed. the Canada Pension Plan Investment Board spent $1.7 billion purchasing the Liberty Living Portfolio and Greystar/PSP purchased the Nido London Portfolio for $920 million.

CBRE highlights London as one key hotspot, attracting a record £1.98 billion of transactions across the first half of the year.

This growth is a reflection of the number of investors who increasingly see the high performing yields of student property as a better alternative to buy-to-let and commercial property. Indeed, student housing has become one of the main drivers of investment activity on TheMoveChannel.com, with university accommodation regularly appearing in the site’s monthly charts of its 10 most popular listings.

Demand has been particularly strong on TheMoveChannel.com for student property in regional cities. Indeed, The Mistoria Group singles out student property in the North West, with investment volumes rising by 66 per cent over the last 12 months.

“A key driver for the rise in demand for HMO student property is down to the huge growth in student numbers over the last few years. According to UCAS, the number of university applicants has reached a record high, as demand for higher education courses continues to rise. Figures published earlier this month reveal that overall there has been a 3 per cent increase in the number of applications, compared with the same point last year,” comments Mish Liyanage, Managing Director of The Mistoria Group.

Marcus Roberts, Director of Student Investment and Development, adds: “This is the first time the UK has outpaced the US in student housing investment which is quite remarkable given their disparate sizes. North American, Middle Eastern and Russian investors have led the charge into the UK. We expect continued global competition for stock, combined with limited opportunities, to lead to further yield compression in the near term, but with the UK remaining the second most popular destination for international students, top-tier university cities with low supply, such as London, Bristol and Edinburgh, still offer potential.”

Student property’s appeal and strength as an asset, though, is not just confined to the UK. Savills also cites The Netherlands, with its English-language education offer, as an emerging proposition. The Netherlands has seen an average annual investment of $200m in the last three years, the majority of which has come from private, domestic capital, but foreign investment is growing.

In Germany, early investors have successfully launched a premium product, filling a gap in the market next to the not-for-profit Studentenwerk offer, while France’s student housing market is characterised by growing investor interest but limited available supply. This has put downward pressure on French prime student yields, which stand at 5.4 per cent.

Beyond Europe, Australia is a key emerging market given its high quality of life and proximity to two of the top five source markets for international students in 2015: China and South Korea.

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