June 4th, 2019
A recent report by Knight Frank has revealed that investment in Purpose-Built Student Accommodation (PBSA) has reached an all-time high of US$16.3bn, surpassing the previous high of US$15.9bn invested in 2017.
Further research by Real Capital Analytics also revealed that cross-border investment accounted for approximately 40% of the total investment over the past three years. The United Kingdom is a key player in terms of cross-border investments with the private student accomodation sector being the second largest in the world, after North America. In the past decade, the value of the UK’s PBSA value has reached approximately £50bn.
Knight Frank believes that the appetite for PBSA can be credited to the fact that the UK is regarded as a student ‘haven’ around the world. The student property market in the UK is well established and British universities are highly desirable amongst both domestic and international students. International students currently makes up for 16% of the total number of full-time undergraduates in the UK and 19% of the overall student population in Higher Education.
Back in April, it was reported that 19.2% of students applying to UK institution for the 2019/20 term were from overseas. This means that there will be an increase in demand in PBSA as there isn’t enough university-owned accommodation for the large volume of domestic and international students, with many international students coming from an affluent background who will seek out premium accommodation.
Although there has been a slow-down on domestic students with the number of 18-year-olds in the UK currently falling, Knight Frank believes that domestic demand is expected to rise in the long-term. Looking at their analysis of the Office for National Statistics population projections, the undergraduate population is set to increase by 15% by 2030.
The globalisation of PBSA means that we will see large-scale, global owner-operators starting to emerge over the next decade and existing operators will look to expand on a global scale.
James Pullan, head of student poperty at Knight Frank, said of the findings: “Higher education and globalisation are closely linked. The knowledge capital produced by universities is key in underpinning the global economy, whilst the role universities play in driving technological development has transformed the way economies are organised.
“Economic growth globally is expected to moderate over the coming years. This change will require a response from property investors. We expect further growth in investment volumes within the student property market as investors focus on specialist sectors to secure outperformance.”
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