A continuing positive outlook for the student property market and some interesting trends coming to the fore in 2014 are two highlights from the latest Knight Frank annual report for the UK student accommodation sector.
Over the next 12 months, Knight Frank anticipates rental growth of 3% in London and 2.75% in the regions, with investment returns stabilising.
Buoyed by a projected rise of 3% in the number of full-time students, and a structurally-undersupplied market, the sector is now seeing interest from a wider-than-ever range of investors, including US and Middle East equity sources.
Knight Frank has measured the difference in rents for the first time, finding those for purpose-built student accommodation (PBSA) are up to 75% higher than for HMOs in Oxford and Newcastle, and 56% higher in London;
The Knight Frank Student Index shows London rents are up 1.73% year-on year in the 13/14 academic year, while blended regional growth is 1.59% – a solid performance given the recent introduction of tuition fees;
Studio rents have grown marginally more quickly than rents for “en-suite” cluster flats. Students in London currently pay an average of £299/week for studio accommodation;
Average total returns for the year to September 13 were 7.8%; student property outperformed all other traditional commercial asset classes;
The start of this academic year saw all core UK markets effectively fully-let;
There are currently over 13,000 student bedrooms planned or under construction in London; however Knight Frank believes the future pipeline will be squeezed by the introduction of CILs;
The cities with the lowest supply of PBSA include Bath, Brighton, and St Andrews.
The sector’s performance track record has been underpinned by a lack of good-quality student housing in almost every market, and an increase in students demanding a “lifestyle” element to their accommodation.
The report finds there are clear opportunities for providers to add value through both design – including refurbishment of existing stock – and intelligent branding. This element of the sector has until now been overlooked, and student accommodation brands have a low level of recognition among students. By increasing awareness of their brands, providers can target specific market segments and achieve higher returns. Knight Frank also expects there to be some consolidation of operators in the management sector in 2014.
Confidence in the sector is evident, and demonstrated in a simple way by the schemes currently taking shape. There has this year been a trend for increasingly tall developments, some as many as 35 storeys.