International investors are buying into UK student accommodation in a big way, as they open their eyes to alternative investment assets.
Two North American investors and a Russian oligarch have between them spent $2.5 billion in the last few weeks on UK student housing developments. The moves give a hint of the demand for residential assets that could soon head into the UK private rented sector – as soon as completed developments are available for sale.
The US buyers are Greystar and the Canada Pension Plan Investment Board. Greystar, which likes anything with beds in, has agreed to buy a £600m portfolio of Nido branded student housing from UK private equity seller Round Hill Capital, reports the Wall Street Journal. This follows the pension board’s purchase of UK student housing company Liberty Living, in a £1.1 billion deal that gives it 16,700 rooms across 17 cities.
Meanwhile, Russian oligarch Mikhail Fridman is reported to have splashed out around £532m for another student accommodation portfolio. And investor Carlyle Group has sold its Pure Student Living portfolio, which had grown to 2,170 student rooms across five London sites, to a Luxembourg based investor, LetterOne Treasury Services.
In the UK market, student housing has seen massive growth, with early investors profiting from the growth of a new dedicated market to house university students in purpose built accommodation on or near further education campuses across the country. Returns are now coming down, with prices rising as more investors move into the space. Real Capital Analytics assesses the average sector return at 5.8% this year, down from 6.4% last year.