UK Student Housing Investment Overtakes US for First Time

UK investment volumes hit $6.5 billion in the first three quarters of 2015

Savills has reported that total investment volumes in the UK student housing market reached record levels in the first three quarters of 2015, exceeding US investment volumes for the first time. Focusing on big-ticket deals ($7.5 million+) and excluding land sales, the UK saw investment of $6.5 billion, compared to just over $3 billion in the US.

Savills World Student Housing Report states that the UK’s record levels have been driven by foreign investment, led by North America which was the source of 80% of all cross-border deals in the 12 months to September 2015. All the top global student investment deals in 2015 have been into the UK, led by the Canada Pension Plan Investment Board ‘s $1.7 billion purchase of the Liberty Living Portfolio and Greystar/PSP’s purchase of the Nido London Portfolio for $920 million.

Paul Tostevin, Associate Director of Savills World Research, comments: “Reflecting the maturity of the UK market, the major transactions have all been portfolio deals. Increased investment activity has brought with it yield compression, particularly for investments in prime London where net initial yields on direct let properties are now around 5%.”

After the UK, Savills cites The Netherlands, with its English-language education offer, emerging as a highly investible proposition. The Netherlands has seen 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%.

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.

Marcus Roberts, director of student investment and development, comments: “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.”  

View the full Savills World Student Housing Report 2015/2016.