The purpose-built student accommodation sector is expected to close 2022 with investment volumes of around £6bn despite debt and construction cost headwinds, estimates CBRE.
CBRE identified £500m of investment in the PBSA sector for Q2 2022 across 14 transactions. The investment was weighted towards operational assets in Q2, accounting for 11 of the 14 transactions and 75% of PBSA investment by value.
Despite ongoing supply constraints and slower development activity that could impact investors’ ability to purchase PBSA assets, key players have demonstrated continued confidence in the sector.
GIC and Greystar Real Estate’s anticipated acquisition of the Student Roost portfolio is predicted to be the driving factor behind this upward trend.
Overall, the residential sector saw a 20% decrease in investment in Q2 2022 compared with Q2 2021, according to the agent’s data. CBRE estimated the total recorded investment in the residential sector to be £2bn in Q2 this year, down from £2.5bn in Q2 2021.
However, despite headwinds from rising debt costs and higher construction costs, year-to-date transaction activity, combined with current pipelines, points to investment volumes reaching a record total for 2022.
The biggest area of growth in residential investment is the BTR sector, which accounted for 65% of total investment for the quarter at £1.3bn, 59% higher than Q2 2021.
More than 80% of capital in the BTR sector was deployed across the regions, with investors attracted to the yields on offer in these markets.
Key second-quarter deals included Swiss Life Asset Managers and Mayfair Capital’s acquisition of the Duet BTR scheme in Salford, the forward funding of Lisbon Street in Leeds by Cortland Group and Get Living’s forward funding of Sherlock Street in Birmingham.
Another sector that showed strong growth in the period despite the market downturn was affordable housing. The sector showed strong levels of liquidity, interest coverage and income generation.
It continues to attract a growing weight of institutional capital, particularly for well-located assets. Notable transactions for the quarter included the joint purchase by Thrive Homes and CBRE UK Affordable Housing of their second affordable housing property, and Octopus Real Estate’s acquisition of a registered provider of social housing, marking its entry into the affordable housing sector.
These headwinds will also affect other residential sectors, such as co-living, where sourcing funds for schemes may prove challenging. However, higher costs across the UK residential market are somewhat mitigated by strong rental growth in the short term.
Andrew Saunderson, head of UK residential capital markets at CBRE, said: “The UK residential sector remains a highly competitive market and, as such, yields remain largely stable across all locations. As we head into the second half of the year, we anticipate continued investment into the sector from a wide range of capital sources but remain alert to the recent softening of market sentiment.”
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