PUBLISHED : Monday, 29 October, 2012, 9:20am
UPDATED : Monday, 29 October, 2012, 9:20am

UK student accommodation offers a dynamic property investment opportunity


Jonathan Baines is a Director of Investment, EMEA at Colliers International. He has over 25 years of experience as both a European real estate fund manager for The Government of Singapore Investment Corporation, one of the world’s largest sovereign wealth funds, and also in setting up and helping run one of Europe’s largest international real estate advisers. In the last 10 years he has focused on the Central London and prime European investment and development markets.

According to the British Council, the UK student population is forecast to grow by more than 20 per cent over the next decade. The Unite Group, one of the UK's leading developers and managers of student accommodation, reports that the supply ratio across the UK of purpose built student bedrooms in relation to full time students seeking accommodation is 1:3, and in London even worse at 1:4.

In addition to this growing demand in the sector, student accommodation also has the investor attraction of ensuring a strong secure rental income. Normally the contractual income is for 48 weeks per year, as students pay for the year, not just for the term time, and the contracts are normally guaranteed by the student’s parents when the leases are signed. Colliers International’s research shows that student accommodation in the UK has historically been below normally required standards with outdated halls of residence, old fashioned facilities, and accommodation dispersed over a large geographical area, often quite far from the university lecture halls. For these reasons, students often move out and in to the private residential sector as soon as possible. 

Increasing numbers of foreign students, especially from Asia, are taking up UK university places. These students expect high standards of accommodation. They want, and will pay more for, secure and modern accommodation, and developers are beginning to change their business plans to meet this demand. These companies are revolutionising the market and developing student accommodation in line with top universities around the world – offering wi-fi and better leisure and social facilities on site – often located close to the university in buildings that are modern and safe.

Investors can invest directly and in companies that own student accommodation. In some cases the developer and operator let the property back to the investor. Alternatively, the investor can buy the accommodation directly from the developer and manage the rental process themselves or in conjunction with the University’s housing division.

As with any competitive investment sector, prospective investors must carry out detailed research, seek professional advice, and then choose the city and the university carefully. The Russell Group represents 24 of the UK’s leading universities. Like all ambitious and successful universities, they are constantly striving to improve not only their academic excellence but also the quality of their student accommodation to attract the best students.

Student rental accommodation is a growing sector, and in the UK it has already attracted some of the most sophisticated Asian and global investors. For example, the Government of Singapore Investment Corporation has recently invested significantly in the Unite Group and Gingko Tree has invested in a UK-wide student accommodation operator with a presence in several London universities. Student accommodation, although historically neglected, is now expanding, and Asian investors are becoming particularly active and influential in this sector.



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