Since the start of 2020, a large number of new investors entered the purpose-built student accommodation (PBSA) market. A record-breaking year for investment, investors spent £5.77bn – an increase of 5.7% on 2019 and topped the 2015 record for most PBSA investment by 0.8%.
More investors are to follows, as Barings, Brydell Partners, Franklin Templeton, Crosstree and Ares were among those making their sectoral debuts. The amount invested and the number of new entrants shows investor confidence in the market remains strong with its ability to deliver attractive, sustainable returns. It reflects a broader trend of re-allocation from ‘traditional’ real estate sectors to rented residential accommodation.
2020 also saw a single deal account for the majority of activity. It was Blackstone’s third move in the UK PBSA sector, with the last being an exit of the Union State portfolio in 2016. Blackstone’s £4.66bn acquisition of iQ Student Accommodation from Goldman Sachs and the Wellcome Trust accounted for 81% of investment in the year. For a comparison, Unite’s purchase of Liberty Living in 2019 made up 40% of investment activity in that year.
Excluding Blackstone’s acquisition, 60% of volume came from international investors – showing overseas investor confidence remains high in the UK higher education sector. Now the UK has left the EU, global students’ appeal continues.
The second quarter of 2020 saw the impact of investment volumes due to the Covid-19 pandemic. Blackstone’s acquisition of iQ – which completed in May 2020 – was the exception, however only two investors completed on transactions in that quarter.
Savills research shows that investor confidence in the PBSA sector is once again growing and there is a greater appetite for acquisition opportunities as we see the acceleration of the vaccination programme continue. Savills reports anticipation for a sharp rise in demand for PBSA as international travel restrictions and social distancing measures ease.