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Equity firms target student accommodation market

The UK’s student accommodation has been targeted by private equity firms, who are making major investments in what they see as a lucrative market, according to a new survey.

They are ramping up their investments and are pumping hundreds of millions of pounds into a resilient sector, with an eye on high rental returns in post-Brexit, post-Covid Britain.

Recent research from property consultants, Jones Lang Lasalle (JLL), reveals that one-third of deals for student property in 2021 so far have been financed by private equity, compared to about 15 per cent in total between 2016 and 2019.

With student application numbers projected to rise by 8.5 per cent this year and purpose-built accommodation oversubscribed, property remains attractive for private equity firms. They are sitting on more than 300 billion dollars globally for property investments alone and want to broaden their assets beyond offices, retail and hotels — all badly hit by Covid-19.

Private equity investors now own 55,000 student beds, according to a JLL analysis of the top 10 biggest landlords across the sector. That is equivalent to eight per cent of the UK total.

Research Unite Group Plc, a provider of student accommodation in the UK across 25 cities, reveals that the sector requires a further 310,000 beds to cater to all first year and international university students, who typically live-in purpose-built accommodation. Construction is currently failing to make a significant dent in that gap.

According to property consultancy The Mistoria Group, investor enquiries from student accommodation have surged over the last six months, up 23 per cent from UK and international investors.

Managing director Mish Liyanage said: “Without doubt, the student rental market is the most financially lucrative for investors if it is managed well. However, if landlords fail to keep their finger on the pulse of an ever-evolving marketplace, they can easily fall into the trap of not planning properly, or using an inexperienced agent, which may leave them with costly void periods.”

He said that since 2011, student accommodation has outperformed all other traditional property assets and has been the strongest-growing investment property market in the UK.

He also said that it continued to be one of the most resilient investment sectors, with rental incomes and property values remaining stable, or increasing. The attraction of the student accommodation sector has been driven by structural undersupply and positive rental growth year on year.

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