Student property will remain a very profitable asset class giving robust return despite the existing disruption caused by the Covid-19 pandemic, according to Cushman & Wakefield.
The property firm sees student property as a solid, high income-producing asset class that will continue to offer stable income streams thanks to high occupancy levels.
Russell Hefferan, partner in Cushman & Wakefield’s Student Accommodation Capital Markets team, commented: “Overall, in the UK there is a healthy amount of student applications, with overseas numbers ahead of 2019 according to UCAS.
“From 2021 there is also going to be a continued increase in the number of UK 18-year olds coming through the system. The demand and supply dynamics remain positive for the sector and it is in good shape to weather the storm.”
90 North Real Estate Partners is among a host of investment firms that continue to have faith in the student property sector.
The company, in partnership with Rasameel Investment Company, has just acquired two newly built student accommodation properties in Edinburgh and Leicester for a combined purchase price of £22.2m.
Goods Corner in Edinburgh features 108 studio bed spaces and is situated opposite the University of Edinburgh’s King’s Building Campus, the main campus of the College of Science and Engineering, to the south of the city.
Dover Street in Leicester comprises 135 bed spaces and is located in the heart of the city, close to the railway station, University of Leicester and De Montfort University.
Both properties were constructed in 2018 and each have historically been 100% let with strong bookings for the 2020/21 academic year.
The combined purchase price of £22.2m represents the strength of the student accommodation sector in the UK, despite the current challenging economic climate.
The transaction demonstrates that the fundamentals of the market, such as university performance, asset quality, occupancy levels and micro-location, remain strong, according to Hefferan.
He said: “Whilst in the immediate term COVID-19 presents obvious challenges for the industry, this transaction provides an excellent example of the strong, long-term fundamentals student accommodation offers.”
These two new properties are in core locations and provide housing to high-ranked universities in what John Yeend, partner at 90 North Real Estate Partners, sees as “undersupplied markets”.
He commented: “With structuring to ensure continuity of income to cover this current period of occupational uncertainty, we expect these investments to deliver strong performance.”
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As a fundamental, demand I am sure will continue. On ability to pay, what with reduced income on the parent front I am not so sure that the sector will escape lower returns. Rents are set and are falling fast (in London anyway). Are students such fodder for Landlords that they wont pay less as well?
Groups of professionals will be the preference over students for the better properties, forcing them into the dross or purpose built student ghettos.
Investors should go for better standard properties which can be marketed to various groups of flat sharers until students disabuse themselves of any illusion that they are a preferred or privileged group.
Purpose built student accommodation, where investors "buy" a room should be avoided as they are very like the bygone timeshare properties, with no easy resale options, escalating maintenance charges and no option to avoid the increasingly unattractive student market.
''Students disabuse themselves'' ? will never happen, have you ever met a student without a chip on their shoulder, and as for their parents mostly fall into the flash with no cash bracket, rent to a dustman or a road sweeper, nicer people and much better tenants.
Andrew
Totally agree - always amused by their designer gear and the parents' posh cars on lease or pcp, which they couldn't afford to buy outright.
On a brighter note, in Scotland students may often have dustman or road sweeper parents and buck the trend. About the only successful (but unaffordable moving forward) SNP policy has been no tuition fees for Scottish students, allowing more modest students to attend University AND afford my rents!
No way would I dedicate any investment to students.
They are a declining demographic.
Substantial numbers of them won't need Uni accommidation.
They will do their Uni work from the parental home
CV19 has revealed that students don't need to physically attend a Uni.
Far better to make student properties suitable for professional singles.
If the LL then wants students then he has the opportunity to take on two types of tenants.
Certainly having all eggs in the student basket wouldn't be wise.
Remaining a dedicated student LL is certainly not the way to go in light of the changes that CV19 have caused.
It shouldn't be that difficult to make a student property an attractive proposition for professional single tenants.
The days of the standard 3 year Uni jolly are coming to an end.
LL should take into account what will be changed student requirements.
The old student business model is over.
I agree with you, Paul. I've learnt my lesson.
One thing's missing though... You've forgotten to use your favourite word, "feckless", when describing the students. LOL....
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