• Sector continuing to attract large scale investment

• Larger operators looking to consolidate

• Affordability driving innovation in room types and hybrid operating models

£975m was invested into student accommodation sector in the first quarter of 2018, according to CBRE, the world's leading real estate advisor, who has compiled a report identifying the biggest trends in the sector.

This total follows an outperforming 2017, which saw £4.68bn invested in the sector, with four portfolio sales representing £2.07bn (44%) of this total. The acquiring investors into these portfolio sales have been mostly international capital in partnership with the UK’s major student housing operators.

Analysis of CBRE’s regular valuation data of 201 schemes and 58,883 bed spaces, showed a total return of 9.58% in the 12 months to 30 September 2017 and average rental growth of 2.98% nationally.

The last year has seen a consolidation of the larger operators who are seeking to operate at significant scale. CBRE’s Operator League Table indicated that of the 290,000 bedspaces controlled by the top 24 operators, 133,700 (45%) are owned or controlled by four platforms (Unite Students, UPP Ltd, IQSA, and Liberty Living), and 230,000, or 80% are controlled by the top ten platforms.

 Jo Winchester, Head of Student Accommodation at CBRE
Student accommodation continues to perform well, attracting large scale investment from all types of investor, but with the market dominated by larger operator purchasers and portfolio sales. The market consolidation is being driven by the continued desire for operating cost savings and increased market share and perhaps enhances brand awareness in certain towns. 
Jo Winchester, Head of Student Accommodation at CBRE

There is ongoing concern around the affordability of higher education in the UK, particularly in London. The new proposed draft London Plan is attempting to facilitate ‘affordable’ Student accommodation. If implemented, 35% of accommodation is to be ‘affordable for the student body as a whole’.

Jo Winchester comments: “The desire for cheaper accommodation is beginning to drive innovation in room types and hybrid operating models. In terms of construction, we are seeing creative alternatives to the classic en-suite layout which are both cheaper to rent and cheaper to build, we are also seeing the return of modular construction methods.”

Though it is unclear what impact Brexit will have, the student sector is likely to weather the storm better than other sectors. Visa restrictions on international students now look less likely to be imposed since they have been found to have a low overstay rate.

Jo Winchester concludes: “The weak pound continues to attract students and investors from outside the EU, though the impact of potentially reduced research funding from the EU does remain a concern for universities.

“The potential for rental growth remains good and the general shortage of investors compared to opportunities tends to support values and the market overall is improving, especially in London and prime regional towns.”