The student accommodation sector has grown massively over the last few years. In 2014, investment into the sector reached £1.5 billion. This is expected to reach £4.5 billion in 2018, seeing the total investment volume triple in just four years!
Why is this?
There has been a record percentage of young people accepted to university this year. In England, a record 27.9% of the 18-year-old population have been accepted through UCAS. In addition to this, 26,400 EU students have been accepted to study in the UK (an increase of 1% on A-level results day 2017), alongside a record 31,510 students from outside the EU (an increase of 4%). This growth has delivered a massive opportunity to developers, investors and managing agents alike.
Over recent years, international investors have sought alternative sources of yield and the student asset class growth has delivered a strong solution. In 2017, student property investment totalled £4 billion, up 25% on the previous year. The Financial Times reported that international capital sees university accommodation as a reliable source of property investment due to the city centre/large town locations and the perceived reliability of student rent payments.
Practices are now acknowledging student accommodation as an independent sector, away from the generic alternatives. Both Knight Frank and Cushman & Wakefield have established independent teams to focus on the sector as it evolves to become a core asset class for global investors. These teams are growing at an impressive rate and as a specialist recruiter in the sector, I am witness to the steep increase and continued demand for talent within this market.
As the market becomes increasingly attractive, the standard of assets is improving, not only to combat the growing competition, but to meet the new expectations from tenants.
The student accommodation market is being driven by consumers, as is arguably the case with all real estate sectors. Students no longer want a dingy, cheap room to sleep and study, they are looking for quality rooms with personal and social spaces and modern interior design, and they are willing to pay a premium for this.
This shift has meant accommodation developers, managers and investors need to advance their approach and offering. Students are demanding more from their housing, looking for cinema rooms, communal space, gyms, adequate storage space and Wi-Fi. On top of this, they need to be in a central city location, have easy access to transport links and in some instances, car parking facilities.
Student Accommodation is an exciting market to be involved in with a lucrative future ahead. The number of developers and investors in the sector are rising at an impressive rate and the growth we have seen is expected to sustain. I’m looking forward to watching the market grow further over the coming years.