Student housing investment is now one of the top sectors across both sides of the Atlantic according to the latest data from IPD and other sources here and in the US.
According to IPD student property has returned almost 12% since the start of the year, while all property types have returned just 1.2%, equities 8.2 per cent and gilts 4.9 per cent. According to Jones Lang La Salle US funds in the student sector are doing even better with returns closer to 40%.
During the boom student housing investment was practically unheard of, but now it is a 200 billion dollar industry. This growth is fuelled by a number of factors, like the changing mindset of investors who have gone from chasing the highest possible yield, to preferring safety even at the expense of higher yields.
This favouring of safe-haven investments during economic downturns ties in with the fact that students tend to stay longer at university while jobs are scarce - making student housing investments stand out as a golden investment during times of economic volatility. At the same time university populations have continued to grow at rates far greater than that of the accommodation to house them, widening a shortfall of supply that has always existed in the UK, and creating a similar shortfall in the US.
Philip Hillman, director of student housing and higher education at JLL, said: "Not so long ago, investors looked at student housing as an alternative property type. It is hard to justify that now, as it is becoming a must-have investment for most large funds."
Large funds including Chinese government-backed fund and the Dutch pension fund PGGM's purchase of student housing provider University Partnerships Programme, which has an enterprise value of 1.4 billion USD, and US private equity group Carlyle, which started work on three student housing developments in central London.
This interest is hardly surprising given that student housing funds are outperforming in both the UK and the US. Unite, the UK's largest student housing provider outperforming all other non-listed UK property funds during 2012. In the US American Campus Communities and Education Realty Trust were the two top performing REITs in the US.
- Monday 05 November 2012