UK student housing attracted investment of nearly £800m in the first half of the year, according to research released today by CBRE.
This is more than double the £375m invested in the sector in the same period in 2011.
With occupancy rates for student housing reportedly at 99%, and a severe shortage of affordable accommodation in the private rented sector, the niche sector is expected to see strong growth at least in line with inflation in university towns.
While institutional investors prefer completed projects with long leases, they are starting to consider forward-funding, according to CBRE. However, institutional investors still require de-risked income streams and long-dated exposure.
Jo Winchester, head of student housing advisory, CBRE, said: “The current lending market is dominated by large-scale loans against well-managed portfolios, but debt remains restricted for new entrants, single property deals and projects outside of London.
“While they tend to prefer large transactions, insurance companies are able to fund direct let properties and still meet low-risk criteria as their exposure is only based on a conservative percentage of valuation.
“There is no shortage of investor demand, but the market is hampered by a shortage of new high-quality development opportunities. Proposed changes to the REIT regime, together with the significant increase in the number of new operators in the last four years could widen opportunities for indirect investors by creating a greater choice of investment funds, as well as creating an alternative exit position for established operators.”
Sophia.Furber@estatesgazette.com
