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Student Accommodation Delivers Impressive Returns

Purpose-Built Student Accommodation (PBSA) assets have outperformed those in the commercial sector, bringing in over 11% total returns in select markets.

Figures revealed by leading global real estate firm CBRE has shown that while capital values for all mainstream UK commercial properties fell by an average of -3% year-on-year (September 2018 – 2019) to deliver 2.4% returns, the PBSA sector delivered a total return of 9.4% in the same period, with London performing exceptionally well at 11.3% returns.

Compared to the previous year, the PBSA sector delivered fewer returns but still managed to outpace the mainstream markets vastly.

Commenting on the findings, Tim Pankhurst, Senior Director, Valuations, CBRE, said: “Student accommodation continues to give investors superior returns to mainstream commercial property.”

As with non-student accommodation, rents across the board rose, PBSA’s saw a 2.7% and a 2.6% increase on a gross and net basis for the year, with net rental growth in London unsurprisingly being the strongest at 4.5%.

Regional geographies saw a 1.8% increase in rents while secondary towns mustered a 1% increase.

CBRE Director Pankhurst appends: “The performance gap increased significantly this year as PBSA momentum was largely unchecked by the woes afflicting the more traditional markets.

“Within the sector, many of the same trends that we have seen for some time – out-performance of London, Super Prime and Prime Regional over Secondary, out-performance of larger assets over small, and out-performance of assets in towns where student applications have grown – persisted into 2019. As we head into 2020, we continue to expect PBSA to out-perform given exceptionally strong investor demand, an overall lack of supply at the macro-level (if not in every micro location), and a proven track record of delivering solid returns in uncertain times.”

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