As early acquisitions this year have shown, the outlook for the student accommodation sector remains very strong.
We expect continued demand for purpose-built student accommodation to be driven by a big population bulge in the 16 to 20 age bracket of school leavers set to start university in the next two to three years, and from overseas students attracted by the perceived strength and reputation of the UK’s education system.
On the supply side, while there has been a high level of student accommodation development in recent years with some markets and cities experiencing a surplus, some locations, particularly in the regions, have considerable levels of undersupply.
Key to identifying where these opportunities lie is knowledge of the overall market and the ability to identify areas where new-build activity has been low and supply cannot meet anticipated demand.
An understanding of where and how students want to live, how they use their accommodation and being able to deliver this at an affordable price is also imperative.
From the perspective of investors, purpose-built student accommodation schemes, once completed and occupied, can generate high single-digit or double-digit geared cash-on-cash equity yields, which for assets typically in or around city centres is compelling compared to other sectors. As a result, we continue to see strong investor demand to support development of purpose-built student accommodation.
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