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15 January 2019

There are now more students in higher education in the UK than ever before with 1.8m studying full-time, up 3.3% from the previous year. As UK universities continue to recruit an increasing number of students from outside the UK, the growth in EU and international students are now outpacing domestic students.

UCAS application trends highlight that for the 2017/2018 academic year, domestic student numbers dropped by 4%, while EU and non-EU applications grew by 1% and 6% respectively.

To meet the rising demand for student housing, the development of purpose-built student accommodation (PBSA) continues at pace. The number of PBSA bed spaces has risen to a record 627,115 in 2018/2019, with a total of 31,348 new beds being delivered for the academic year. Furthermore, a total of 36,000 beds are expected to be delivered in time for the 2019/2020 academic year.

Despite the market seeing a slowdown in the number of studio bed spaces being delivered, this room type still accounts for 32% of all new beds in 2018. It has, however, grown 130% in four years.

Investor appetite remains active in the UK’s PBSA sector

PBSA investment volume is expected to reach £3.75bn by the year-end according to new research by Cushman & Wakefield, highlighting that investor appetite remains active. Overseas investors continue to dominate the market, making up over 55% of 2018 transactions to date, with a broad spectrum of demand from investors in the Far East, the US and continental Europe.

For overseas buyers, investment has been diverse as they look for ground-up developments through to the acquisition of income-producing assets. In addition, the market is also seeing growing demand from UK institutions who are increasingly focussing on income-generating assets (singular or portfolio) in strong performing PBSA markets.

Demand for good-quality regional PBSA assets remains strong, as evidenced by the sale of Brunswick House in Cambridge in October, which indicates that yields for super prime assets, even in regional cities, have hardened to around 4.75%. However, the weight of capital entering the market continues to put downward pressure on yields overall.

GSA's investment portfolios in the UK market continues to progress, with key development sites in Cambridge, Exeter and Bournemouth set to enter operation in 2019. Together these assets will deliver a total of 1,469 beds for the UK’s undersupplied market.

Despite wider political and economic uncertainty and the maturity of the UK PBSA market, there remains a wide spectrum of investors wanting to acquire property, underpinning values. Furthermore, the reputation of academic institutions and the fundamental characteristics of UK PBSA remain compelling and continue to drive domestic and international capital and the future growth of the sector.


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