Student accommodation investment hit £3bn by the end of 2016, according to CBRE.
While 2016 saw decreased activity from institutional investment, consolidation of larger platforms and the appetite for indirect investment meant sector players dominated the market.
Jo Winchster, senior director, student housing valuation and advisory, speaks to Shekha Vyas about CBRE’s 2017 predictions
CBRE said a number of assets yet to transact, such as Aston Student Village (£200m+), the Union State portfolio (£400m+) and Woburn Place (£140m+), could make for a strong start to 2017.
Following the recent spate of portfolio sales, the firm expects to see a return to a largely single-asset market, with strong demand for quality operational assets, forward funding deals, and sites from private equity houses and the larger owner-operator platforms.
In 2017, game-change towns where universities are moving campus locations into new areas are going to be a key investment opportunity for student housing. For example, Ulster University is building a new campus in Belfast city centre, relocating 12,000 students from Jordanstown.
Other opportunities for investment include universities with big plans, such as Bristol’s £300m expansion, and towns with little supply where first movers have an advantage.
Refurbishments are also set to increase in 2017.
Other trends include an increase in operators in the wake of Unite-Students’ decision to convert to a REIT and as the number of third-party managers grows, investors will gain greater cost certainty.
CBRE said the full impact of Brexit on the sector would continue to unfold. Although the weak pound so far serves to make the UK more attractive to overseas students, the introduction of visas is a moot point and a perceived “xenophobic” effect of Brexit may be offputting to some. The loosening of A-level grade requirements will hopefully continue to counter the coming demographic dip in the UK population in the student age group.
The mainstream UK banks are expected to continue to support the sector. However, increased regulatory costs and the consideration of the return on risk weighted assets will have an impact on pricing, while some mainstream banks have already anecdotally confirmed that their appetite extends to the top operators only.
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