More student flats on cards as Edinburgh and St Andrews singled out as hotspots
Property advisor Savills also anticipated that a record number of new investor groups will enter the market following a flurry of activity in 2020 despite the effects of the pandemic.
At £5.77 billion, 2020 was a record-breaking year for investment in UK purpose-built student accommodation (PBSA), a 5.7 per cent increase on 2019, according to the firm.
According to Savills latest research, Bath, Birmingham, Brighton, Edinburgh, London, Manchester, Oxford and St Andrews top the list for those looking to develop PBSA this year. It noted that investors are likely to target university towns and cities with a strong reputation and with a clear supply/demand imbalance of beds.
Excluding Blackstone’s £4.66bn acquisition of iQ Student Accommodation from Goldman Sachs and the Wellcome Trust, 98 per cent of investment was into single assets and 60 per cent of the volume in 2020 came from overseas investors.
James Hanmer, head of UK PBSA investment and co-living at Savills, said: “PBSA yields have remained stable this year at 3.75 per cent for prime London and 4.75 per cent for prime regional cities, supported by more stringent rent guarantee structuring. This yield stability reinforces why investors are attracted to PBSA, for the long-term income streams it provides, demonstrating the maturity of the asset class.
“There is no perception of longer-term structural issues in demand for UK higher education, demonstrated by the 8.5 per cent year-on-year increase in applications to universities for this coming year. Noteworthy increases in applications by country include China and India, at +22 per cent and +26 per cent respectively.”
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