MIPIM UK: Student housing is an attractive investment, in the right place

With student numbers set to rise across Europe, the student housing sector is becoming increasingly attractive, delegates heard at a MIPIM UK briefing.

But with rising land values in the UK, there is a risk that investors will have to go up the risk curve to maintain returns, the event in London was told.

Panelist Paul Tebbit, director at Blackrock, said that he is seeing some badly priced land and underestimation of development costs. While there is value in student housing, some projects are not in the right place.

Right operator
The key to success is choosing the right operator with a good relationship with higher education, according to Nick Collins, real estate partner at Nabarro. Mark Bladon of Investec said that he had seen some operators pricing the student rent too bullishly. ‘There is no point having student accommodation if it’s got empty beds,’ he said.

In July of this year Investec Structured Property Finance provided Knightsbridge Student Housing with funding of £41.5 mln (€57 mln) to finance the development of two student accommodation buildings in Southampton.

But oversupply shouldn’t be a problem in the UK any time soon, Richard Simpson, managing director of property at Unite, added. Currently in the UK there is 50% less supply than there is demand from first year and overseas students. Given that the UK is the second most desirable destination for overseas students, and is continuing to grow its market share where the US is losing market share, the sector should see an extra 300,000 students coming to study within the UK in the next few yeas.

Unite has a portfolio of 46,000 student beds and achieves occupancy levels of 99% of bed spaces delivering a rental growth of 3.8%.

The Class of 2020 conference - Rolling out the red carpet
How and why more institutional-grade investors should get involved in the student accommodation market in the UK and continental Europe will be a key topic at The Class of 2020 annual conference taking place in Amsterdam on 3-4 November.