Rental growth and high occupancy rates continue to attract investors to the student accommodation sector in the UK, though the limited availability of appropriate investment vehicles risks frustrating attempts by individual investors to benefit from the sector, according to a new report from Savills Research.
Rental growth and high occupancy rates continue to attract investors to the student accommodation sector in the UK, though the limited availability of appropriate investment vehicles risks frustrating attempts by individual investors to benefit from the sector, according to a new report from Savills Research.
'High demand, low supply growth, rising rents and high occupancy rates make student accommodation an investment vehicle of choice during uncertain economic times, and suggest that the sector will remain relatively low risk for the foreseeable future,' says Jacqui Daly, director of Savills Research. 'An underlying supply/demand imbalance point to a robust outlook for the sector, while the fundamental strengths of the business model mean that capital values have not fallen to the same degree as other commercial or residential real estate.'
Nationally, average rents for Purpose-Built Student Housing (PBSH) grew by 5% between 2007/8 and 2008/9, and 7% in London. However, despite the benefits, Savills Research believes that the current financial climate - in particular the withdrawal of developer debt-funding - will limit the scope for investors to grow their interests. As a result, the past 12 months have seen consolidation of stock, with operator activity focused primarily on buying and selling existing stock from universities and private operators, as well as refurbishing old university stock, rather than organic growth through new developments.
Demand will therefore continue to rise, the report concludes. This is particularly true in London, where planning constraints are severely limiting the ability of operators to grow their portfolios and increase the level of new supply in the market, it added.
