Monday, July 4, 2022

UK student accommodation market continues to gather momentum amongst investors

The student accommodation market in the UK grows as capital values increase 6.5% year on year in the 12 months to September, the latest analysis shows

The student accommodation market in the UK continues to gather momentum amongst investors, with capital values increasing 6.5% year on year in the 12 months to September, the latest analysis shows.

This is up from the 4.5% recorded in the previous 12 months and the figures from the index from CBRE also shows that on a gross and net basis, rents rose 3% and 3.4% respectively.

In central London the student market outperformed the regions by some margin. Driven by capital value growth of 12.4%, central London student accommodation annual total returns reached 17.5% for the year to September 2018, compared with 14.2% for the previous 12 months.

Meanwhile, the regional student accommodation annual total returns in the 12 months to September 2018 were 10.5%, with capital growth of 4.5%.

Of the properties located outside of central London, student accommodation situated in super prime towns reported capital growth well above those in prime regional and secondary locations at 11.1% compared with 6% and a fall of 9% respectively.

While gross rental value growth was positive in all three categories, net rental value growth showed much more of a divergence. Net rental value growth in super prime and prime regional towns in the 12 months to September 2018 was 3.6% and 3.9% respectively. In secondary locations, net rental value decreased 1.5% over the year.

Large student accommodation properties of 500 plus beds slightly outperformed small properties with less than 250 beds and medium accommodation with 250 to 500 beds.

Indeed, capital values for large assets rose 7.2% pushing total returns to 12.9% while capital growth in small developments was 5.8% and in medium 6.2%. Student accommodation properties resulted in total returns of 11.6% and 12.2% respectively.

This first published student accommodation index demonstrates the continued strong performance of the sector which has outperformed the CBRE monthly index over the last eight years, said Jo Winchester, executive director of student accommodation valuation and advisory services at CBRE UK.

She said UK Student Accommodation is now firmly established as a mainstream investment sector. Investors will find the increasingly sophisticated raft of influences on performance highlighted by this index, including location, asset scale, university rankings, applications, and distance to university very informative.


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