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London

London’s student population will double by 2025 increasing investment and demand in UK student housing


UK’s students worth £25bn per annum

London’s full-time student population is expected to rise by 50% in the next 10 years while capital flows into student housing is expected to triple reaching £5.7bn by end of 2015, new research by property firm JLL revealed.

Direct investment in the UK Student Housing market has surged over the past two years, rising from under £500m in 2010 to £3.8bn over the first half of 2015 (£1.5bn in London). Non-EU students have been the fastest growing segment, with numbers increasing by 50% over ten years. A recent study by London First shows that international students bring a net benefit of £2.3bn per annum to London's economy supporting 60,000 jobs in the capital.

The research further highlighted that rising house prices and constraints on mortgage lending have forced more people into rented accommodation. More students are also renting; 28% of London’s student population are living in Houses of Multiple Occupation (HMOs). The provision of university managed accommodation has not kept pace with the growth in student numbers and the increasing quality and quantity of PBSA stock has provided students with a welcome alternative to the rising rental costs of HMOs. Additionally, two of the fastest growing segments of London’s student population are overseas and postgraduate students, who have occupied much of the PBSA (Purpose Built Student Accommodation).

Philip Hillman, Chairman of JLL’s Alternative Division said:

“We have seen extraordinary growth in UK student numbers over the past 20 years and while UK student numbers are now stabilised, international student numbers set to rise dramatically in the next decade. The provision of good quality student accommodation was traditionally the responsibility of the universities but in recent years, most new accommodation had been provided by private investors and developers.”

“The Gross Value Added supported by student spending throughout the UK is of the order of £25 billion per annum. This represents 1.03% of UK GDP. Put in perspective, this figure is equivalent to one third of the total contribution of the aviation sector to UK GDP.”

Himanshu Wani, Associate Director - UK Research at JLL said:

“Purpose built student accommodation in the UK has seen a significant rise in investment activity, with projected capital flows into the sector of £5.7 billion by the end of 2015 (up from £1.7 billion in 2014). This is especially pronounced in London, with one of the largest student populations globally, supporting strong demand for student housing. Indeed, with the London student population expected to rise by 50% by 2025, one of the main challenges will be developing sufficient supply.”

Student housing is one of the largest sub-sectors within the ‘Alternative’ property asset class. Alternatives comprise all of the real estate sectors beyond traditional office, retail and industrial and includes: Healthcare, Leisure, Self Storage and Student Housing. In tandem with student housing, alternatives are making up an increasing share of the UK real estate investment market. In 2014, 20% of all transactions were in alternative sectors, up from just 5% in 2010. JLL forecasts that this will rise to 29% of all transactions.

JLL_London_Student_Housing_Report_v10.pdf