​Servicing strong investment interest in student accommodation

As reported by Knight Frank, student numbers are rising and indeed a record 41% of 18-year-olds in the UK applied for a full-time undergraduate course for the 2020/21 academic year. Overall, there were 22,500 more applicants than the previous year. The all-important overseas student market is also coming back – with a 7.5% increase in applications compared to 2019 levels.

This strong demand for places naturally leads to a demand for student accommodation. Providing high quality, affordable, well-situated accommodation is an important part of any university’s offering. With high numbers of students and with house and applications rising, the growth in both new developments and refurbishments is therefore no surprise.

Purpose-built student accommodation (PBSA) has become an important asset class in its own right. In fact, PBSA accounts for 9% of all development funding.

According to Savills, 2020 was a record-breaking year for investment into PBSA with £5.77bn invested. This underlines the ability of the PBSA sector to generate attractive and sustainable returns, with a high degree of resilience to fluctuations in the wider economy.

At Aldermore, we’re seeing investor appetite for student accommodation investment feeding through into rising levels of lending for both development and refinancing purposes.

Earlier this year, we were pleased to provide a £9.6 million property development loan to Torsion Developments for the construction of 91 new studio apartments in Leeds. Based close to the University of Leeds, the development will also include a common room, gym, cinema and cycle storage.

More recently still, we provided a £16 million Commercial Residential Investment loan to Kexgill Limited, one of UK’s largest still private providers of student accommodations, typically in properties with dual use between residential and student. The funding was used to refinance nine student properties in Nottingham and one in Liverpool. This brought our total lending with the client to £46 million.

Aldermore funds a wide range of deal sizes, providing funding at competitive rates across development loans, investment loans and refinancing facilities. We build flexibility into our solutions as we recognise that circumstances may change as projects develop. We look for good proven operators, sensible room rates and well-located properties within the student accommodation sector.

We look forward to continuing to support the PBSA sector to meet buoyant student demand, and to build relationships that last.

John Carter is commercial director for commercial real estate at Aldermore