Investment volume in UK student property set a new record at £5.1bn (€6.45bn) in 2015, more than doubling the previous year’s figure of £2.41bn (€3.05bn). It also accounted for 7.12% of total UK commercial real estate investment volumes. This momentum is expected to continue across the sector given the unique asset class and strong market demands, according to Knight Frank.
Knight Frank predicts that the y-o-y rental growth witnessed in 2015 within student accommodation will continue in 2016, leading to a rental uplift of 3.5% over the year, providing a relatively secure income base for investors.
James Pullan, head of student property, Knight Frank, commented: “2015 was a bumper year in terms of transaction volumes, and whilst portfolios dominated activity, we expect to see an increase in single asset opportunities throughout 2016. We predict a rise in institutional and international investors looking to invest in a buoyant asset class as pipeline opportunities come to market and investors look to diversify their asset portfolios.
“Despite predictions that the London development pipeline will fall, we anticipate that other UK markets will open up and that there will be a consolidation in the sector.”
This increased momentum within the student property industry demonstrates a broader trend of a substantial shift to the alternative asset classes by investors, with purchasers now viewing specialist sectors as a resilient asset class – delivering longevity and stable income flows. Eighteen percent of all commercial property investment transactions in 2015 were in specialist property and Knight Frank predicts that total investment into these sectors will increase by 10% year on year to reach £14.3bn (€18.1bn) by the end of 2016.
All four core specialist sectors - hotels, healthcare, student property and automotive - saw volumes exceed their five and 10-year averages in 2015. Since 2006, £46.6bn (€58.5bn) has been invested into these sectors, with a record £13bn (€16.4bn) invested in 2015 alone.
