Cross-border investment in student accommodation accounted for approximately 40% of total investment over the last three years, according to RCA data compiled by Knight Frank. With a record amount of capital deployed into student assets worldwide, the UK has become the second largest market for purpose-built student accommodation (PBSA) outside of North America.
Rapid growth over the last decade means that the sector is now valued at more than $65bn (£50bn). Knight Frank has published an extensive global report examining key global trends from across the student property sector, including the structural undersupply present across markets at all stages of development.
Key to global growth in the sector has been a strong global investor appetite for assets, underpinned by the safe haven appeal of the established UK market as well as rising demand from domestic and international students.
The globalisation in the market extends to the make-up of the student body, with non-UK domiciled students representing 16% of full-time undergraduate students and 19% of higher education students overall. Data from UCAS shows a 6% year-on-year increase in the number of applications from international students for the 2019/20 academic year.
Current demographic trends mean the number of 18-year olds in the UK is falling, however domestic demand is expected to rise over the long-term. Knight Frank analysis of ONS population projections, along with entry rates from UCAS, points to a 15% increase in full-time undergraduate numbers between now and 2030. This would represent an increase of 220,000 to over 1.7m.
James Pullan, Global Head of Student Property at Knight Frank, explains:
“Higher education and globalisation are closely linked: the knowledge capital produced by universities is key in underpinning the global economy, whilst the role universities play in driving technological development has transformed the way economies are organized.
“The temptation for governments facing increased challenges, from globalisation as well the growth of populism, is to become increasing inward-looking when framing their policies.
“Yet, in stark contrast, higher education must remain outward-looking. Today’s best universities are built on the development of cross-border partnerships, the strength of academic networks and an ability to attract students from around the world. Accommodation is playing a greater role in supporting this, by helping create student communities.
“Economic growth globally is expected to moderate over the coming years. This change will require a response from property investors. We expect further growth in investment volumes within the student property market as investors focus on specialist sectors to secure outperformance.