Student Accommodation outpaces commercial property, with returns of 4.9% in the year to September 2020

Purpose-Built Student Accommodation was the best-performing sector in the year to September 2020

While total returns were -3.5% for all mainstream UK commercial property in the year to September 2020, Purpose-Built Student Accommodation (PBSA) delivered a total return of 4.9%, making 2020 the third consecutive year that PBSA has outperformed mainstream property, according to the latest PBSA index from global real estate advisor, CBRE.

Although this was the lowest annual return in the 10-year history of the index, this was against a backdrop of wider economic malaise brought on by Covid-19 that caused returns across all asset classes to fall. Indeed, the decline in PBSA returns, of a little under five percentage points (from 9.6% in the year to September 2019) was lower than the decline seen by mainstream sectors of around six percentage points.

PBSA saw capital values fall by -0.4% in the year to September 2020. This was the first year where capital growth was negative in the ten year history of the index, but the sector proved to be more resilient than mainstream property, where capital values fell by -8.7% (ranging from -0.7% on Industrial to -18.7% on Retail).

The index is disaggregated into ‘Central London’ and ‘Regional’ geographies, the latter being further split into Super Prime, Prime, and Secondary. London PBSA returns out-performed Regional PBSA by 1.9%, driven by stronger capital growth of 1.8%. Outside of London, PBSA returns have been notably weaker in Secondary locations, significantly under-performing the national average due to capital values falling by -9.9%.

Over the long term, PBSA has given investors exceptional risk-adjusted performance, offering a winning blend of high nominal returns with low volatility, and once again it delivered resilient returns in a time of market stress.

Total returns of 4.9% for the year to September 2020 exceeded those on all mainstream sectors, even Industrial, thanks to average value decline of just -0.4%.
Tim Pankhurst, Senior Director, Valuations, CBRE