Student accommodation has now emerged as a mainstream global investment category, according to new research from Jones Lang LaSalle. The market now presents a significant investment opportunity for developers and private operators alike, with transactions in the UK reaching nearly GBP 2 million by the end of the year. This is nearly double that enjoyed in 2011.
The US is also a prime destination for student accommodation investment, although transaction levels are significantly lower than the UK, standing at just over GBP one million (USD 2 million). This positive growth indicates that student accommodation is moving away from the alternative investment sector.
Philip Hillman, lead director of student housing and higher education team in London, summarised: "Student housing is increasingly a global asset class; Students are [...] international and mobile; Developers and operators of student accommodation now operate across continents [and] investors are increasingly investing overseas."
This growth is being driven by rising student numbers, increasing to 165 million in 2011 from 98 million in 2000. By 2025, this number is expected to stand at over 263 million, offering a wealth of opportunities for investors. The stable income and "solid rental growth", combined with resilience during downturns, makes the student accommodation market appealing.
However, the global market is unbalanced, with activity primarily focused in the UK and US. Both nations are renowned for their high quality educational establishments and enrolments are rising higher than the supply of accommodation.
Nevertheless, there is an opportunity to target foreign student markets, according to Jones Lang LaSalle. In mainland Europe, growth is likely over the next decade, while India and China could also expand their student offerings as they focus on educating more domestic students. What's more, study-abroad student numbers are expected to increase to eight million by 2025, requiring universities across the globe to offer more accommodation.
Mr Hillman commented: "Institutional investors in this sector require scale ability – the potential to secure significant operational portfolios with a development pipeline. The biggest barrier to major financial institutions investing in many of the emerging student accommodation markets is the lack of quality stock to invest in.
"However the sector in these emerging markets should benefit from an accelerated acceptance of the investment characteristics of the sector as a result of the growth of the UK & US markets."
- Friday 09 November 2012