The demand for purpose-built student accommodation (PBSA) bed spaces, as Knight Frank calls it, currently stands at over 8 million and is projected to grow at a rate of around 8 per cent each year until 2025. At this point total demand for PBSA bed spaces will total around 13 million across the country.
The PBSA market in India, Knight Frank says, is still in its infancy, despite the country boasting one of the largest populations of undergraduate students in the world. It pegs the current PBSA bed spaces at 1.6 million in India - a figure which is just 4 per cent of total student enrolment.
"The majority of this accommodation is operated outside of university control by private owners. Often it is off-campus, of poor quality and with little modern value-add facilities such as WiFi or laundry services," the Knight Frank report observes.
In the Indian context, it pegs the total investment in PBSA market at around $100 million in 2018. The potential demand for PBSA in India, it says, is around $50 billion. This is based on 8 million beds and an average value per bed of $6,250. This, however, is just a fraction of the total investments being made at the global level, which Knight Frank estimates at $16.3 billion in 2018 - surpassing the previous high of $15.9 billion in 2017.
“Investors from the United States have been the primary source of cross-border capital, spending $7.5 billion on PBSA over the past five years. However, the balance of power is shifting. The outflow of capital from Asia-Pacific has eclipsed that from both Europe and North America in two of the previous three years. In fact, investment from Asia Pacific into student property markets around the world has risen by 47 per cent in the last five years," says the Knight Frank report titled Global Student Property 2019 authored by Matthew Bowen, their head of student property research.
The United States (US) and the United Kingdom (UK) remain the two most mature global PBSA markets when measured by investment volumes, Knight Frank observes, which have accounted for 56 per cent and 31 per cent of total global investment in 2018, respectively.
That said, it sees the share of investment into Asia Pacific markets rise going ahead. “Australian higher education, in particular, continues to attract a larger share of the world’s internationally mobile students. However, in the short – term, so strong is the focus from both Asia Pacific and North American investors on European PBSA that that the continent is expected to be the primary focus for investment,” Bowen says.
So, who is investing big in the PBSA bed spaces across the globe?
Cross-border deals emanating from institutional investors, according to Knight Frank, have made-up the bulk of activity over the last three years and have accounted for 75 per cent of the total volume of capital deployed during this period.
"There has also been a notable increase in activity among private equity funds as well, a trend which is expected to continue. According to financial data provider Prequin, $124 billion of fresh capital was raised in 2017 alone and many of the North American funds behind the largest of these pools have a global or European remit," the report says.