Property News > Interest in UK student accommodation from private equity firms ramps up

Interest in UK student accommodation from private equity firms ramps up

The UK’s student accommodation market continues to attract the interest of private equity firms, who are ramping up their investments in search of high rental returns. 

Indeed, as investors begin to speculate in post-Brexit, post-Covid Britain, research from real estate advisors Jones Lang LaSelle reveals that private equity has financed one third of student property deals so far in 2021 - a significant increase against the 15% recorded between 2016 and 2019. 

With demand for purpose-built student accommodation already outstripping supply, and with student application numbers projected to rise by a further 8.5% this year, private equity firms are becoming increasingly attracted to the prospect of investing in the sector. Globally, such firms are already sitting on more than $300 billion for property investments alone, and are keen to look beyond sectors which have suffered the most over the course of the pandemic, such as offices, retail and hotels. 

According to a Jones Lang LaSelle analysis of the top ten biggest landlords across the sector, private equity firms now have an 8% of the UK total market share of student beds, owning 55,000. 

Research from student accommodation provider Unite Group Plc 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 cover this significant shortfall. 

According to The Mistoria Group, the last six months have seen a 23% increase in the number of UK and international investor enquiries relating to student accommodation.  

Mish Liyanage, managing director of The Mistoria Group, 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. Since 2011, student accommodation has outperformed all other traditional property assets and has been the strongest-growing investment property market in the UK.  It has also 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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