image credit -Ron Ellis
A boom in the tertiary education sector, drawing in both domestic and overseas students, coupled with an undersupply of the product has attracted investors to the sector. The next stage in the sector’s evolution is likely to be a wave of M&A activity. Although the market still remains highly fragmented, a large percentage of recent transaction volumes have been driven by investors acquiring portfolios in order to build scale quickly to meet ambitious ownership targets.
However, as the market has matured, the frequency with which such portfolios become available has reduced. The UK has relatively few operators of scale, with only five groups providing more than 20,000 beds each (assuming Unite’s acquisition of Liberty Living). The scale provides operators with efficiencies in their operating margins, which will become an increasingly important element of returns as the market matures. Without M&A, growth choices for operators will be organic, which is likely to be piecemeal and slow to achieve the desired scale, or through development, a risk profile not acceptable to many investors or funders. A changing planning environment adds to the risk of achieving growth ambitions through development alone.
As such, we believe that the sector’s supply and demand fundamentals, combined with other headwinds, will force a wave of M&A activity across the sector resulting in fewer larger operators at one end of the scale and smaller, most likely, geographical focused operators at the other end. From 2015–2018, an estimated £7.9bn of PBSA assets have been traded and the total UK PBSA market is estimated to be worth over £50bn.
References :
https://sites.google.com/view/uniaccommodationcom/home?authuser=1
https://londonstudenthouse.blogspot.com/2020/01/student-housing-providers-in-london.html
http://studentaccommodationuk.tripod.com/
https://openiddigital.wixsite.com/website
https://directory.hampshirechronicle.co.uk/company/1285803007803392
