We guarantee that the information in this article will surprise you as the student accommodation market today is light years away from that of yesteryear.
Why is the student accommodation sector attracting more and more attention from commercial real estate investors?
Student Accommodation as a new property asset class has attracted more commercial real estate investors simply because it has outperformed all other forms of property classes for some time. Investors have found that private, boutique student residences are one of the most lucrative ways of expanding an investment portfolio, due to the stable yields and low void periods caused by consistent high demand. The investor can enjoy excellent yields in the safe knowledge that their property is being expertly managed by an expert team of people who are committed to keep the standards of the development at the very highest of levels.
Further, high quality student accommodation is in chronic short supply, as university places are still heavily oversubscribed with only 10 places available for every 14 applicants in the UK alone. This results in insufficient university owned accommodation being placed under an increasing amount of strain. It has been identified that in the UK there are only 6014 university-owned student beds, for more than 45,000 students.
In your opinion, which countries offer the best long-term returns for student accommodation investment?
Here in the UK the trend for a higher standard of accommodation is also fuelled by the globalisation of the Higher Education market and the increasing number of overseas students wishing to study here. This consistently increasing number of international students has created a demand that far exceeds the supply of quality purpose built accommodation and so we believe the UK offers the best opportunities for investors wishing to enter this market.
What kind of yields can investors expect from a student accommodation investment?
We offer a selection of developments throughout the UK in over-subscribed university cities, with low supply of student accommodation, thus confidently offering investors NET yields up to 9.16%, assured for up to 5 years.
What in your opinion was the catalyst which opened up the student accommodation market to commercial investors? In years gone by student accommodation was often seen as low quality, low return and high maintenance.
For some time Higher Education in the UK has attracted wealthy overseas students and demand has by far outstripped supply. Developers and investors found that there was a market for good quality, purpose built, boutique type accommodation from students and their parents. The developers that we work with found that by managing the occupied residences properly and keeping the building in a good condition, students no longer wanted to live in the run down ‘digs’ that so many of us remember. The result has been an increased demand for modern, parent approved, safe, attractive residences.
Further to this in 2000 (Scotland) and 2004 (England and Wales) HMO’s required mandatory licensing under the Housing Act 2004. As a result some landlords raised rents to cover the additional overheads. The result was a demand for better accommodation by students.
Is there anything else you would like to mention about the student accommodation sector?
We would also note that the demand for accommodation throughout the country is such that an increasing number of councils are encouraging the introduction of purpose built student accommodation (PBSA) as a way to alleviate the strain on local housing. This is evident when we consider the success by our developers in obtaining planning permission for such developments. Therefore the business model for purpose built student accommodation looks extremely positive for the future.
We have also found that students also are now demanding accommodation where bills are inclusive of rent, with large central entertainment and communal areas, Wi-Fi, a private gym, laundry, and bicycle storage. Students also benefit from an on-site management team, comprising of professionals and student peers, who help with any matters that may arise. The PBSA model fits perfectly with our end users.
We recently visited the completed 160 pod development X1 Arndale House in the heart of Liverpool where we were delighted to find a bright, safe, modern residence with wall mounted LCD TVs playing Sky TV on each floor, Wi-Fi access throughout, and a private state of the art fitness suite. A central open atrium lit the building, along with three decorative trees, adding to its bright and fresh modern feel.
We were introduced to the resident student officer who was situated in the office ready to deal with any matters that the students may have. There was great feel about the place with students quietly going about their business, using key cards to access first the main building and then their own respective floors.
Clarus Property Investments offers exciting custom built boutique accommodation for students and young professionals. They also specialise in sourcing high specification buy-to-let properties from leading developers, enabling them to offer investors attractive yields in sought after, high demand areas. Having networks with developers, constructors, agents and management agents, Clarus offers only the most attractive of property investments.