LONDON: Investment in UK student accommodation reached £2.37 billion (RM12.93 billion) in 2014, making it the third year it hit the £2 billion mark, according to CB Richard Ellis (CBRE) November UK Student Housing MarketView.
Despite higher tuition fees, the student market does not seem to be slowing down. According to the Universities and Colleges Admissions Service, at least 499,730 new undergraduates entered the tertiary market for the 2014/15 year, making it the highest intake to date.
This is also prompted by the rising number of international students in the United Kingdom, from 15,450 in 2004 to 26,070 in 2014.
This year, investor profiles have also shifted completely towards institutional buyers. With the growing number of serious institutional buyers and operators entering the market, UK student housing is arguably the most advanced of alternative sectors, said CBRE.
This is due to the increasing availability of performance data, more specialist third-party managers and greater transparency on yields following an increase in the volume of deals.
The CBRE Student Housing Index showed a total return of 10.86% in the 12 months to September 2014 compared with 9.95% in 2013 and 9.75% in 2012.
Overall average rental growth this year was 2.25%, less than in previous years, while average rental growth in regional towns appears to be closely aligned with inflation and running at 2.4%.
Being an increasingly global sector, the UK market is now seeing more pension fund investors from across the world and students are becoming more globally mobile.
Responding to this, many universities are now in partnership with local universities in other countries.
Many operators are seeing more opportunities in European university cities, especially where there are huge student populations with very little purpose-built supply.
CBRE expects to see an increase in cross-border activities among operators and investors in the coming year.
This article first appeared in The Edge Financial Daily, on December 12, 2014.