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Purpose-built student accommodation sector to reach £53 billion in 2019

The UK’s Purpose Built Student Accommodation (PBSA) sector is predicted to reach a total combined value of over £53 billion by the end of 2019.

That’s according to Knight Frank’s ‘Student Property’ team, which forecasted that in excess of 29,000 additional purpose built student beds will be delivered next year. This will bring the UK’s total to over 600,000, representing a national average of around £87,000 per bed space.

The global property consultancy anticipates that North American and Asian investors will continue to dominate the UK PBSA market next year, with the United States, Singapore and Hong Kong showing the strongest interest in acquisitions.

What’s more, 2018 saw a weight of Singaporean capital committing to UK student accommodation, with landmark deals including Singapore Press Holding’s acquisition of Unite’s Mayflower portfolio for £180 million.

“We predict that there will be in excess of 29,000 additional purpose built student beds delivered next year, that’s similar to the population of Gibraltar,” James Pullan, global head of student property at Knight Frank, said.

“This uptick in delivery is a very significant contribution to the UK’s housing shortage, helping to ease the pressure on existing housing stock.”

He said that with several universities facing financial challenges, as well as the potential impact of the Augar review on tuition fees, universities must ensure that they get their accommodation offering right.

In fact, according to a recent Knight Frank/UCAS survey of over 70,000 students, value for money is the key driver in the accommodation choices of new students.

Alongside the undersupply of student accommodation in the UK – with thousands of students unable to access halls of residence – Knight Frank predicts ongoing uncertainty and ‘investment threats’ across global markets as the main drive for investment into student assets.

Pullan continued: “Despite Brexit, global investors continue to acquire PBSA assets in the UK, fundamentally underpinned by the UK’s world-renowned higher education system. The asset class offers a stable income stream, with strong year-on-year rental growth prospects. When compared to more mature asset classes, such as the offices sector, PBSA is standing out.”

Due to the underlying market fundaments and growing student numbers year-on-year, Knight Frank predicts 2.0%-plus rental growth in 2019. It also said that existing players will look to build upon newly acquired portfolios, as well as overseas investors (particularly from the US and Far East) who have been tracking the market for opportunities.

This year has seen a combination of private equity and institutional money invested into PBSA, as well as new candidates, particularly Cambridgeshire County Council’s acquisition of Brunswick House from Apache Capital for £38 million, which represented the highest yield paid by a council pension fund for direct let student accommodation.

The value of the UK’s PBSA sector by year is as follows:

2014 – 30,900,000,000

2015 – 39,200,000,000

2016 – 42,500,000,000

2017 – 47,800,000,000

2018 – 50,500,000,000

2019 – 53,200,000,000

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