Purpose-built student accommodation (PBSA) developments are springing up in record time throughout the UK’s major cities as well as some smaller university towns, with a total 2020 investment of £5.77 billion. For property developers and investors these buildings can be hugely profitable, producing a steady yield of 4.75% in regional cities and 3.75% in London, because there’s a huge amount of demand and a fresh crop of domestic and international students starting their studies every year.
According to real estate service provider Savills, these are the student towns and cities worth investing in.
This small Scottish university city might seem like an unlikely candidate for first place, but Savills’ research shows that undergraduate applications are up 8% year on year, there’s a huge push to free up houses for non-student residents, and there are a range of sites available to invest in – something London-based universities are lacking. Two new, state-of-the-art buildings providing on-campus accommodation for 400 students were recently proposed and built within two years.
Savills’ data show there are over 72,000 full time undergraduate students studying in Birmingham, particularly around the University of Birmingham’s main campus, and applications have risen by 5.4% over the last year. Birmingham has the largest pipeline of proposed PBSA developments in the UK, with beds for 6,700 students currently in the planning and building stages. There are five universities in Birmingham and demand across all of them has remained high for the past five years.
According to Alex Pease of Watkin Jones, demand for rentals in the South West of England is rising almost at the same rate that supply is falling, and that includes student rentals. Savills’ league table shows the student population of Bath is just over 24,000 and applications are up by 4.9%. The local council believes demand for student accommodation in Bath is likely to stay high for the next decade and the University of Bath is actively supporting and encouraging PBSA developments.
Much like Birmingham, Manchester is home to several different institutions with a large total student population. Savills say there are 66,000 undergraduates and applications are up 4.6% year on year. Manchester City Council is also keen to move students into purpose-built accommodation to free up houses for other residents. High quality, modern developments have already found a home in the city after Manchester City Council increased its PBSA pipeline in 2020.
PBSA rental yield in London is lower than regional areas but devolved planning permission powers make it easier to get approval for developments in the capital than anywhere else, providing a certain percentage of the student rooms are affordable. 210,000 students are currently priced out of the PBSA rental market in London, could further investment and new more affordable buildings improve this?
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