Global student accommodation market now an investment hotspot

Over the past 10 years the student housing sector has grown to become a global real estate class that is now attracting attention from investors, developers and private operators, according to the latest research from property consultants Jones Lang LaSalle.

The firm’s Global Student Housing Report reveals that the student housing market is now worth more than $200 billion, while the number of students globally is expected to rise from 165 million today to 263 million by 2025, further increasing the need for new housing.

Transactions in the world’s biggest student housing markets, the UK and the US exceeded $3 billion and $2 billion respectively in 2012, over double the numbers seen in 2011.

This new demand has in part been caused by the rapid increase in the number of middle class international students from key Asian countries such as China and India. Over half of all international students now come from Asia, followed by Europe, Africa and South America. This sudden increase in demand has resulted in an undersupply of student housing.

The market for student housing is now outpacing other forms of commercial real estate with typical returns of between 11 -15 percent thanks to enrolments rising at a higher rate than supply. In addition, the sector has proved to be counter-cyclical in nature, with the number of international students growing during the global economic downturn.

The report pinpoints emerging markets in mainland Europe and Australia as key regions for growth. In Australia between 2002-2011 international enrolments into higher education almost doubled with 67 percent coming from Asian countries alone, making this and the wider Asia Pacific region areas of future growth and investment potential.

And the returns in this sector are attracting more than just the traditional developer/operators investors. The most active players of late looking to add these assets to their portfolios have been equity funds, sovereign wealth funds, pension funds and investment managers.

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