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Savills: Global student housing investment sets record in 2016

According to Savills, global investment in institutional student housing reached a record $16.45 billion in 2016, beating the previous record of $15.6 billion set in 2015.

Total volumes by dollar value rose 5.4% in 2016 as a number of newly built portfolios of scale changed hands for the first time.

The U.S. accounted for $9.82 billion of the 2016 investment, compared to $5.96 billion in 2015, reflecting a 65% jump as well as a new record for the country.

Meanwhile, the U.K. saw its second-highest volume at $3.84 billion. The U.K. logged its highest-ever investment volume of $7.24 billion in 2015.

Countries in western Europe recorded the highest growths in investment volumes, with Germany logging a 380% growth to €741 million in 2016, up from €154 million in 2015. Savills expects annual student housing investment volumes in Germany to cross the €1 billion mark for the first time by the end of 2017. France notched a 245% boost to €169 million in 2016 from €49 million in 2015.

The under-supplied markets of Spain, Poland, Hungary, Portugal and the Czech Republic witnessed increasing volumes of purpose-built student housing deliveries. Spain recently saw a joint venture deal for its largest student housing portfolio comprising 37 assets, Savills noted.

Cross-border investors signed 37% of all global student housing deals in 2016, a higher proportion than the offices and retail sectors, which saw 34% and 29% of cross-border investments, respectively. In the U.S., 39% of total student housing investment in 2016 was from international investors, who accounted for just 1% of U.S. deals in 2015.

The growth of cross-border deals was partly attributed to an increasing interest from institutions, pension funds and insurance companies investing across multiple regions to achieve scale, and the investor profile diversifying from primarily sovereign wealth funds and private investors.

"With provision of student housing still low in many countries, there are numerous opportunities for international providers to bring their expertise to new markets," said Paul Tostevin, associate director in Savills World Research.

Institutional student housing is now "firmly" regarded as a mainstream asset that provides a secure income stream in the residential sector and as a gateway to other residential sub-sectors like senior living, Savills said.

The student housing sector presently has higher yields than many other sectors. Australia has a 6% yield in the sector, followed by the U.S. at 5.90%, and Spain at 5.75%. Savills said the U.S. stands out as "particularly high-yielding for such a mature market." Yields are expected to shift downwards in Australia and Spain in coming years.