Institutional investment in purpose built student accommodation has ‘polarised’ the market, according to Knight Frank’s head of student housing.

James Pullen says that almost half of student bedrooms transacted in 2015 were acquired by institutions.

“This wave of Institutional investment has now polarised the market such, that assets which fail to meet Institutional specification have much reduced liquidity,” he says. 

The admission comes as part of the global property firm’s latest Student Housing Market Review, which also revealed that investment into the purpose built student accommodation market reached a record high in 2015.

Some £5.1 billion of transactions were recorded last year, says Knight Frank, compared with £2.41 billion in 2014.

However, the firm predicts that that the development pipeline for purpose built student accommodation in London will fall dramatically this year.

“In 2015 student accommodation showed rock solid occupational demand supply credentials. Rental growth averaged at 3.65% as student numbers grew and supply struggled to meet demand,” explains Neil Armstrong, partner of Knight Frank Student Housing Valuations.

“Whilst the macro picture (3.65%) is relatively steady, each market demonstrates different credentials largely depending upon the current level of structural under supply together with the development pipeline and its delivery in any specific year,” he says.

“London (3.8%) and Manchester (4.8%) are good examples of cities with large student populations and very modest delivery pipelines.”