Investment into the UK’s purpose-built student accommodation sector reached £3.2bn in 2023, down 55% year-on-year, according to Savills.
The sharp decline is attributed to Greystar’s purchase of the Student Roost portfolio for £3.3bn, which took 2022 full-year investment to a record high of £7.2bn.
Without the Student Roost acquisition, PBSA investment in 2023 fell by 18% compared to 2022.
Lizzie Beagley, UK head of student transactions at Savills, said 2023 was a challenging year for global real estate, and the PBSA sector “remained relatively resilient” against a backdrop of subdued economic growth, persistent inflation and high interest rates.
According to Savills, 60% of 2023 transactions were completed by existing investors in the sector, including Blackstone/iQ, which accounted for 20% of total investment activity during the year.
Blackstone’s deals in 2023 include the acquisition of two PBSA sites from Downing Students with a GDV of £370m in London and Edinburgh.
It also acquired Topland Vintage Group’s £160m, 1,209-bed student accommodation and co-living campus next to the University of Warwick in a forward funding deal and Ten Traffic Street in Nottingham, a 522-bed purpose-built student accommodation scheme acquired from the Jensco Group.
Beagley added: “Investors have been attracted to the sector due to the continued supply and demand imbalance which, in 2023, resulted in extremely high occupancy levels and double-digit rental growth across the majority of sub-markets.
“While there has undoubtedly been some softening in PBSA yields over the past year, relative to the other more ‘traditional’ real estate sectors, these movements have been more subdued. The disconnect between vendor’s pricing expectations and investor’s affordability led many owners to pause planned disposal programmes during the year rather than sell at sub-optimal levels.
“There were several new entrants to the market during the year who were able to take advantage of a relatively less competitive buyer pool and relatively attractive pricing compared to recent years.”
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