Student Housing Market
The Competition and Markets Authority cleared the way for Unite’s £1.4Bn acquisition of Liberty Living on 6 November, with the deal proceeding to completion by the end of the same month. Unite refers to a ‘substantial market opportunity’ provided by the 1.5M students requiring accommodation in the UK every year.
This reflects general market sentiment in a quarter that demonstrated the continuing strong appetite of Singaporean-based investors for UK student housing opportunities. Singapore Press Holdings completed its £448M acquisition of Student Castle, Mapletree paid £96M for 1,127 beds in Coventry and Far East Orchard bolstered its portfolio to a total of 3,260 beds with the £66.5M acquisition of 974 beds in Leeds and Sheffield.
Brookfield-backed Student Roost committed £175M to forward fund McLaren’s delivery of 1,387 bed spaces in Warwick and Brighton too, as the Canadian-based fund continues its drive for new development-led opportunities.
It is too early to conclude the exact transaction volume for 2019 but this is likely to have breached £3Bn, in a year plagued by unfavourable market influences. Whilst it would be inaccurate to say Q4 has not felt the impact of a General Election, ultimately favourable macro-demographics continue to underpin investor confidence. Notwithstanding this, actual transaction volumes are likely to be down on 2018 as a consequence of general economic uncertainty hitting some fund raising exercises.
December is home to the popular Property Week student conference and my colleague Rebekah Donaldson has summarised the main takeaways in a blog available on Allsop’s corporate website. Many consumer-led themes dominate debates amongst industry experts with wellbeing and affordability high on the agenda. Industry-led themes of 2019 such as operating budgets, build costs and polarising markets will likely carry the same weight in 2020.
Interest in the secondary markets i.e. non Russell Group destinations gathered pace throughout 2019 and whilst some remain intent on securing opportunities in prime university cities only, confidence is gaining where opportunities are underpinned by well performing younger institutions. Secondary products; first generation PBSA and the HMO sector are intriguing prospects for some investors, particularly in the face of rising build costs and pressures on affordability.
Q4 has not felt the impact of a General Election, ultimately favourable macro-demographics continue to underpin investor confidence
The sector experienced significant capital commitments throughout 2019 and even in its last quarter when the election gripped the nation, deals continued to progress. The Conservative government is not set to make ground breaking changes to the HE sector – there was very little in the way of commitment by way of pledges or legislation in its manifesto. Any changes are likely to be directed towards tuition fees, ensuring university is as affordable as possible for students – this may mean changes to interest rates payable, which may have a positive impact on future student growth.
Removing the prospect of a no deal Brexit will create significant bounce – some investors remain wary and will act with caution in the interim period. If a Brexit deal is agreed, subsequently removing the prospect of a no deal entirely, the shackles really will come off. Investors will however be watching on, placing particular interest on the treatment of EU students in the hope the government agrees a deal that can retain the UK’s desirability as a place for study.
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