Home Real Estate Student accommodation investment UK set for £21bn boost over the next five years

Student accommodation investment UK set for £21bn boost over the next five years

by Jonathan Adams
Student accommodation

Investment in student ‘blending living’ is predicted to soar in the next five years, a thinktank has said.

‘Blended living’ – a mix of Purpose-Built Student Accommodation (PBSA), co-living and hybrid co-living/co-working models – is being driven by the housing crisis and demographic change.

Investors are set to deploy £21bn into ‘blended living’ globally, over the next five years, the think-tank said.

The Class of 2020 foundation is a non-profit thinktank that researches living, working and learning in university cities. It started in 2011 largely as a means to solve the student housing crisis, has evolved quickly since its inception.

Using publicly available data from portfolio plans, UK-based Collegiate topped the thinktank’s list of student accommodation investors. Netherlands-based hybrid hospitality operator The Student Hotel and US student residential specialist Greystar came second and third respectively. Some of the other co-living providers included TheBASE in Berlin, De Key housing association in Amsterdam, The Collective in London, UK, and Medici Living in Berlin.

Yoony Kim, managing director of The Class of 2020, said: “Blended living offers a rapidly expanding investment opportunity and is emerging as a possible solution in urban living for young people shut out of traditional home ownership and rental markets by sky-high prices and rents.

Ryan Manton, Class of 2020’s programme director, said: “Future housing models need to be supported by both the public and private sectors. Stakeholders of all types need to come together to innovate, providing affordable and flexible options, which respond to the changing needs of cities.”

Lines between living, working and learning are becoming blurred, resulting in students and professionals increasingly creating communities and living together.

Therefore, student accommodation investment UK offers great opportunities and this is set to grow in the future. Student accommodation investment UK has seen record growth in the UK in 2019 and emerged as a potential post-brexit investment.

Earlier, the Purpose-Built Student Accommodation was effectively created by Unite Group 28 years ago. Before that, it was an unorganised sector and students relied on traditional properties for their housing needs which included converted houses or flats. Properties were rented out to students by individual small-scale landlords. These properties had standard features only, which often lacked the facilities to meet the demands of students. But, the growing demand for student accommodation commercialised the sector and it is now an important component of real estate. In fact, it is one of the most vibrant sectors of real estate and the UK’s overall economy, with big investors keen to invest in student living. These properties are exclusive to students and developed according to the particular needs of the students. They are usually located at quiet places near the universities which contribute to the purpose of student living and make them a popular choice for students.

As universities across the UK are playing an important role in the country’s economy, the student accommodation sector is drawing ever-more attention from investors, which includes investors from within the UK as well as overseas-based investors. Foreign investors are attracted to the student living sector because of a number of benefits such as dependable growing dividends, capital appreciation for investment portfolios, occupancy, among others. Student accommodation is also a lucrative investment as it provides protection from downturns in the economy. It is less affected by the ups and downs of the economic cycle than most other property sectors.

This real estate component is also in demand among investors as it is fully-managed and requires no or little involvement of the investor which particularly meets the needs of overseas-based investors. There are no fees or deductions involved after the completion of purchase. These properties are managed professionally which relieves the investors of the duties of landlord. Landlords do not have to take care of operational issues on a daily basis and only need to collect the rental payments.

Demand for student accommodation is increasing as student numbers continue to rise, leading to a rapid growth in the sector. Within the UK, a large number of students enrol into universities each year, further contributing to the demand for specialised accommodations such as the Purpose-Built Student Accommodation. The sector offers wide range of properties to students which includes affordable living as well as the luxury component. While affordable student living is preferred by a large number of students, luxury living has its own takers. Luxury living is an important segment of student accommodation investment UK as they are popular among foreign students. A large number of students from outside of the UK are willing to pay more in return for better facilities. Along with the co-living and hybrid co-living/co-working models, Purpose-Built Student Accommodation offers unprecedented investment potential. As cities become more densely populated, the demand for properties with blended living is set to dominate the student accommodation market.

The current undersupply of properties in student accommodation is also contributing to the rapid growth in the sector. It is proving to be crucial as this gap between demand and supply holds a major potential for property investors. There is a lot of competition among investors for new developments as they rush to meet this growing demand for student accommodation. However, at present, the number of students looking for accommodation in the UK is rising at a much faster rate than the rate of new developments.

The demand for student accommodation is high across the UK, but some of the cities are ahead of the rest due to their significance as centres of education.

Leeds is one of such cities which is a hub of higher education in the UK. Boasting a student population of 60,000 spread across 3 universities, it is one of the largest student cities in the country. University of Leeds is recognised as a renowned university globally and draws a large number of international students each year. There are currently 9000 international students at the university alone, which further boosts the city’s prospects as a hotspot for student accommodation investment UK.

These factors make student accommodation investment UK a stable option in the future.

This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

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