The student housing sector in Britain is pushing forward with innovation as investment continues to rise, reaching £975 million in the first quarter of 2018.
This total follows an outperforming 2017, which saw £4.68 billion invested, according to a new report from real estate advisor CBRE identifying the biggest trends in the sector.
International investors are putting money into student housing with the UK’s main sector providers as affordability driving innovation in terms of room types and hybrid operating models, the report explains.
A valuation data of 201 schemes and 58,883 bed spaces, showed a total return of 9.58% in the 12 months to 30 September 2017 and average rental growth of 2.98% nationally.
‘Student accommodation continues to perform well, attracting large scale investment from all types of investor, but with the market dominated by larger operator purchasers and portfolio sales,’ said Jo Winchester, head of student accommodation at CBRE.
The last year has seen a consolidation of the larger operators who are seeking to operate at significant scale. CBRE’s operator league table indicated that of the 290,000 bed spaces controlled by the top 24 operators, some 133,700 or 45% are owned or controlled by the four platforms Unite Students, UPP Ltd, IQSA, and Liberty Living, and 230,000 or 80% are controlled by the top 10 platforms.
‘The market consolidation is being driven by the continued desire for operating cost savings and increased market share and perhaps enhances brand awareness in certain towns,’ Winchester pointed out.
The report says that there is ongoing concern around the affordability of higher education in the UK, particularly in London. The new proposed draft London Plan is attempting to facilitate affordable Student accommodation. If implemented, 35% of accommodation is to be ‘affordable for the student body as a whole.
‘The desire for cheaper accommodation is beginning to drive innovation in room types and hybrid operating models. In terms of construction, we are seeing creative alternatives to the classic en-suite layout which are both cheaper to rent and cheaper to build, we are also seeing the return of modular construction methods,’ Winchester explained.
Though it is unclear what impact Brexit will have, the student sector is likely to weather the storm better than other sectors, the report suggests. Visa restrictions on international students now look less likely to be imposed since they have been found to have a low overstay rate.
‘The weak pound continues to attract students and investors from outside the European Union, though the impact of potentially reduced research funding from the EU does remain a concern for universities,’ Winchester said.
‘The potential for rental growth remains good and the general shortage of investors compared to opportunities tends to support values and the market overall is improving, especially in London and prime regional towns,’ she added.
