A total of £1.13bn was invested into the UK purpose-built student accommodation market in H1 2023, down from £3.2bn in H1 2022, according to JLL.
Investment volumes for Q2 2023 reached £1bn, down 47% on Q2 2022. H1 2023 was the most subdued first half for student investment since 2019, when £1.1bn was invested.
However, investment volumes rose sevenfold compared to Q1 2023, which saw £134.5m invested in PBSA.
Two of the largest deals of the quarter accounted for close to half of the investment. These were DIF Capital Partners’ £300m acquisition of the 4,500-bed Campus Living Portfolio and Blackstone’s £160m forward funding of McLaren and Topland’s 1,209-bed Oaks in Coventry.
The average deal size for Q2 2023, excluding M&A and land, rose from £24.6m to £65.6m, which was in line with last year’s average of £65.3m.
Investment in standing stock accounted for 62% of the Q2 2023 deal total, while forward funding as a share of the total rose to 30%, which is the highest level since 2020.
Investors forward funded 2,331 new beds, more than in the previous three quarters combined.
Huw Forrest, head of UK student housing at JLL, said: “Although we are seeing lower volumes than we have in recent years, this is being driven by broader economic uncertainty rather than concern about sector resilience, which is strong.
“The challenge right now is pricing: between the high cost of debt and the underlying performance of cashflows, buyers and sellers can find themselves in a stalemate. As a result, some investors, in no hurry to invest or divest at a time of high risk-free rates, are choosing to wait and see how expectations adjust.
“Despite the challenges, deal activity continues, and off-market transactions are progressing which is a testament to the underlying strength of interest in the student sector. “
Karl Tomusk, associate director for living research at JLL, said: “Given the continued challenges of development viability, it was encouraging to see an uptick in forward funding deals after the last three quarters.
“Even so, these deals accounted for less than a third of total investment and will deliver just over 2,300 beds – a fraction of the shortfall JLL has estimated. Investment activity might have woken up, but we are still far from tackling the persistent undersupply of student housing in the UK.”
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