International Private Equity Targets Midlands Student Accommodation

Lone Star, Crosstree, Barings, Brydell Partners, Ares and Franklin Templeton: All made their UK debuts in the purpose-built student housing sector in the last 12 months. Now Savills is predicting that more will follow from overseas, with the Midlands in their crosshairs. 

The prediction comes as Singapore-based private equity business Q Investment Partners agreed a £23M refinancing on its 300-bed Straits Village PBSA scheme in Nottingham. The loan provided by Invesco has allowed QIP to pursue its strategy of scaling its portfolio in the UK student housing sector where it currently owns and manages around 1,000 student beds. Conduit Real Estate advised on the financing. 

Savills said 2020 was a record-breaking year for investment in UK PBSA, with £5.8B invested, a 5.7% increase on 2019.

As much as 60% of the 2020 volume came from overseas investors, with Singapore-based investors ranked fourth, spending £111M. 

“There is no perception of longer-term structural issues in demand for UK higher education, demonstrated by the 8.5% year-on-year increase in applications to universities for this coming year," Savills Head of UK PBSA and Co-Living James Hanmer said. "Noteworthy increases in applications by country include China and India, at +22% and +26%, respectively. 

“PBSA yields have remained stable this year at 3.75% for prime London and 4.75% for prime regional cities, supported by more stringent rent guarantee structuring. This yield stability reinforces why investors are attracted to PBSA, for the long-term income streams it provides, demonstrating the maturity of the asset class”.