With a proven track record of returns and strong demand from students, the first five months of 2015 have seen record investment into the sector from across the globe. The report looks at how this marks the ongoing evolution of the sector into a mature and globally recognised asset class.

Investment Performance

Investment into the purpose-built student accommodation market only just fell short of our forecast for last year with £2.45 billion of assets traded, a 23% increase on 2013 levels. This figure has already been surpassed in the first five months of 2015 with £4.2 billion invested (on both a standing investment and site acquisition basis), a record high that is already 70% above last year’s level and 40% above the previous peak in 2012.

With increased investment activity, we have seen yield compression across all sub-markets. This has particularly been the case for investments in prime London where direct let net initial yields are now below 5%. For 2015, we forecast total returns of 14%. This is comprised of average blended yields compressing by 25 basis points and rental growth of 3.5%. Current 2015 yields are 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.}

^{Source: IPD & Savills Research}

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