Investcorp, a leading global alternative investment firm, today published a white paper outlining significant investment opportunities in the United Kingdom (UK) student accommodation sector. The white paper highlighted that an imbalance in demand and supply is creating an attractive investment opportunity in this asset class, particularly for House in Multiple Occupation (“HMO”) student accommodation, a segment largely overlooked by institutional investors to date.
Key findings in the white paper include:
- Increasing demand for student accommodation: Higher education is a large and growing market in the UK. For the 2021/22 academic year, there were 2.2 million full-time university students in the UK, representing a six-year compound annual growth rate of 4.2%. Growth was underpinned by long-term structural trends, including favourable UK demographics and international demand, as well as an increased participation rate amongst the UK population. Approximately 75% of full-time university students in the UK require rental accommodation.
- Supply-side constraints: Significant supply constraints are limiting the growth of new student housing. In the UK, by far the largest source of student accommodation is HMO, with about 850,000 to 870,000 beds. However, new supply of HMO is constrained in university cities by local authority zoning restrictions. The supply of other sources of student accommodation – Privately-owned Purpose-Built Student Accommodation (“PBSA”), university-owned halls of residence and standard residential one or two-bed flats or houses – cannot fully meet an increasing demand and is restricted by strict planning rules and construction cost inflation …