There was £5 billion worth of standing stock and development sites sold in 2012 and 2013, and the early signs for 2014 suggest that we are likely to see high levels of investment activity this year. In the first four months of the year, there have been transactions worth £950 million and this equates to over 17,000 beds.

This is above the level seen in the same period of 2013, it is well above previous years including 2012. With a further £1.4 billion worth of investments on the market we can expect to see activity in the region of £2.5 billion by the year end.

The lower volume of investment activity in 2013 relative to 2012 (33% less) compared to only 18% fewer beds traded reflects an important trend. 2013 saw a substantial increase in the number of deals in prime regional markets (up 76%).

This trend is likely to continue given the attractiveness of the student housing sector to investors, although they will have to bear in mind some of the risks covered later in this document.

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Investment perfomance in 2013 and beyond

We saw some compression of blended average yields in the sector over the last year, with average initial yields falling slightly to 6.2% (6.3% previously). This reflects the increased competition for investments in prime London and super prime regional markets.

Although activity in prime and secondary regional markets increased by 80% last year, yields remained relatively static reflecting the riskier profile of student demand in these markets.

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For 2014, we are forecasting total returns of 13.7%. This is comprised of average blended yields compressing to 6.0% and rental growth of 3.5%. We expect yields in 2014 to be at the levels shown in the table below.

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Lease: 25 year lease to institutional grade university covenant on annual RPI linked increases with a cap and collar. Nomination Agreement: 15 years+ nomination agreement to institutional grade university covenant on annual RPI linked increases with a cap and collar.

Taken from
Spotlight: UK Student Housing 2014