Innovation drives Britain’s student housing sector
Innovation drives Britain’s student housing sector as investment continues to rise
The student housing sector in Britain continues to move forward with innovation as investment continues to rise. Investments into the sector reached £975 million in the first quarter of 2018 as against an outperforming 2017, which saw investments worth £4.68 billion. This has been disclosed in 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.
Data showed a total return of 9.58% in the 12 months to 30 September 2017 and average rental growth of 2.98% nationally.
Head of student accommodation at CBRE, Jo Winchester said 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.
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.
Winchester said 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.
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 which will make 35% of accommodation affordable for the student body as a whole.
Winchester explained that the desire for cheaper accommodation is beginning to drive innovation in room types and hybrid operating models. In terms of construction, there have been creative alternatives to the classic en-suite layout which are both cheaper to rent and cheaper to build, there has also been a return of modular construction methods.
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.
Winchester said 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. She added that 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.