UK PBSA sector to continue domination in 2019, says expert

UK PBSA sector to continue domination in 2019, says expert

A leading analyst in the UK student housing market has predicted a boom for the sector in 2019. As housing stocks for students face crisis across Europe, James Pullen of Knight Frank predicted the development of at least 29,000 new beds across the UK.

Such a growth would increase the sector’s market value to £53bn, according to Pullen.

This prediction comes in stark contrast to the recent history of European student housing, which experienced several dramatic shortages, though such a growth trajectory in the UK is widely expected.

These beds will be built by a range of firms, but a majority of the finances supporting the projects will come from overseas investors, at least according to Pullen.

“Despite Brexit, global investors continue to acquire PBSA in the UK”

In the past 12 months, investors from the US, Hong Kong, and Singapore to name a few, have shown material interest in the UK purpose-built student accommodation. A notable example was Singapore Press Holding’s acquisition of Unite’s Mayflower portfolio for £180m.

However that is not to say the UK market will be dominated by foreign investors. This will continue into 2019, Pullen argued, as shown by the move of Arlington Advisors to buy several large portfolios, across several UK cities.

Pullen also noted, though he is not the first to do so, that investors see PBSA as a secure and stable investment, due to the long-term growth opportunities, largely unaffected by macro-politics.

“Despite Brexit, global investors continue to acquire PBSA assets in the UK, fundamentally underpinned by the UK’s world renowned higher education system,” he wrote.

Although the demand side of the British sector is not growing as quickly as some European markets, according to StudentMarketing’s senior research manager Paulina Kropacova, it keeps its prominence due to its size and reputation.

“We expect seismic shifts in the European PBSA landscape”

“UK demand is not growing as fast [but] is compensated by the market’s maturity, size, and high level of reliability among investors. That’s why the investors are not expected to change their approach.

“The majority of foreign investors usually enter Europe with PBSA investments in the United Kingdom due to its reliability and maturity. Overall, the market is more mature and still ahead of the rest of Europe”, Kropacova added.

However Jorick Beijer, director of The Class of 2020, said the housing think-tank is “curious” about the future of the UK market, due to both political and educational changes and challenges.

“The UK student accommodation market historically is tied into the higher education institutions, which obviously has been a key demand driver. We are curious how this model will be evolving in the next years. Not only because of Brexit, but also by the very pressure on the British education system, we expect seismic shifts in the European PBSA landscape,” he told The PIE News.

Beijer added that recent history points to a continuation of the international investment trends, with “GIC from Singapore an active investor in PBSA… On the other side of the ocean… groups such as Harrison Street and Brookfield [are] doing significant transatlantic investments”.

Harrison Street is perhaps most notable, with a new campus at Paris Saclay.

Elsewhere in Europe, Kropacova pointed towards western Europe, with German and Spanish growth rates outstripping competitors.

Germany was also recently highlighted by StudentMarketing’s Samuel Vetrak as a strong location for potential investors, with popularity that does not seem to be dipping, despite some price hikes.

Read the full article from The Pie News here >