U.K.'s Big Deal
International investors schooled in alternative investments are signing up for U.K. student housing portfolios, with £4.1 billion in transactions and another £83 million under contract by mid-August, making 2015 the most active year for this investment product, according to Deloitte. Of the buyers, 84 percent are cross-border investors, with North American investors accounting for 79 percent of the transactions. For example, Goldman Sachs and Greystar Real Estate Partners purchased 13 properties (one pictured) for £545.6 million in 2Q15, from Knightsbridge Student Housing, which is backed by Oaktree Capital Management. In an earlier deal, Greystar bought three London residences with more than 2,000 beds, from U.K. equity group Round Hill Capital for £600 million. In one of the year's largest deals, the Canadian Pension Plan paid £1.1 billion for U.K. student housing company Liberty Living. Is it worth it? It seems so. This year the average cap rate for U.K. student housing has been 5.8 percent, compared with 5.1 percent for offices, according to Real Capital Analytics.
Markets to Watch
Investment in European commercial real estate is expected to hit €230 billon, surpassing the peak year of 2007, according to Knight Frank. For 1H2015, investment volume hit €104.9 billion, a 29 percent increase over 2014. This year's investment surge, expected to top 2014 by 20 percent, is driven by strong international interest, particularly U.S. investors. Spain's office market is a top investment choice among European investors, given its strong fundamentals that surpass last year. “Prime CBD office rents have risen by 20 percent over the past 12 months, but remain nearly 40 percent below the 2008 peak,” says Humphrey White, capital markets head at Knight Frank Spain.