Mark Robinson, managing director of Fraser Morgan, explains why student accommodation remains an attractive investment option but how quality and location are the keys to success.
After a decade of economic uncertainty and low interest rates, purpose-built student accommodation (PBSA) has emerged as one of the most attractive asset classes available for savvy investors.
With record numbers of people going to university in 2018, demand for student accommodation in the UK remains high, both from domestic and international students.
This gives investors an opportunity to take advantage of rising rental growth rates, providing they are investing in quality developments in the right locations.
Changing trends mean students are more discerning
As students become more aware of their accommodation options, their expectations have become higher. Gone are the days when most students will happily put up with life in drab halls of residence.
There are many factors driving demand for better student living, but a thirst for technology is the main one. Students are willing to pay more for accommodation with high-speed broadband, allowing them to make the most of smart phones, social media and streaming services.
For students (and parents who may be helping pay the rent), value for money, rather than merely the rental price, is of growing importance.
Many are willing to pay that bit more if they can get larger living spaces with kitchens and workspaces, as well additional on-site facilities, such as gymnasiums, cinema rooms and quality communal areas.
Location is an issue for students and investors
Location is another consideration for students, with proximity to campuses and town centre amenities being high on the priority list. In many towns and cities there are student living developments that are located closer to university campuses than the ‘official’ university halls of residence. Schemes that get planning permission in the right location will be the ones in high demand and provide better rental returns for investors.
From an investor point of view, the other important geographical issue is the town or city where they are investing in the first place. For example, cities with an oversupply of student accommodation, or those with a lack of good sites in the right locations, will obviously be a less attractive proposition for investors.
Good design and flexibility present long-term returns
Well-designed student living schemes that won’t become tired-looking or dated after only a few years will make a more attractive investment proposition.
That’s because demand and occupancy is likely to remain high over the long-term if a building stands the test of time. Well-designed schemes are not only more desirable, they are more likely to get planning permission.
They can also be converted into other uses in future, such as a hotel, aparthotel or residential if the student-living market were to take a dip and demand fell.
Fraser Morgan specialises in the development of quality student living projects aimed at investors. We are able to offer these developments on either a land only basis, or as a turnkey investment. For more information, contact Mark Robinson.