Investment in student accommodation is an attractive asset class for both UK and overseas investors. Research by Savills last year revealed that £5.3bn was expected to be ploughed into purpose-built student accommodation compared to £4.5bn in 2016, with international investors in particular boosting this. However, what we typically see is that when investors become involved in the finer detail of student lettings, they don’t always appreciate that each development must be intensively managed in order to be successful.
Both short and long term returns can be attractive and can provide great return, but it is imperative the investment is managed proactively and effectively. The right development has to be in the right place, and delivered in such a way that makes students feel they have been taken into consideration – that’s why we spend such time investing in research and feedback with our students. Only by doing so, and ensuring the properties are let every year, will the opportunities be positive for lenders and investors in student property.
What will be the future of these blocks?
The numbers of both UK and international students are rising, and increasing numbers of people are being accepted onto courses each year so there is always going to be a demand for good student accommodation in some university locations. Research last year revealed that the ratio of students to university beds from 20 of the main city universities in England, Scotland and Wales was disproportionately high – meaning there is still not enough beds for the number of students attending higher level education. So the general need is there.
However, it’s crucial that accommodation is developed to reflect the needs of students – developers can no longer simply build a property and hope for the best; it needs to be approached in a much more sustainable way. It’s not enough to offer students plush facilities like hot tubs and on-site chefs at unsustainable prices – welfare is becoming more and more important.
Gone are the days when providers could supply the bare minimum support at low cost; it is no longer a case of ‘build it and they will come’. In order to stand out from the crowd, student accommodation developers should invest in student welfare in order to truly provide for their residents. Accommodation providers must be equipped to provide the support, facilities and experiences students need to have a happy and healthy time whilst at university, allowing them to develop into self-sufficient, well rounded independent adults upon graduation.
Will they be opened up to the public or turned into HMOs?
While this has happened a couple of times in recent months, this is unlikely for many developments as planning permission for them is often student specific. If providers have to do this then it’s likely they’ve got wrong it terms of how they’ve developed, managed and operated the property.