Get in touch
Tel: +44 (0)161 772 1390
Menu Open Search Icon
Tel: +44 (0)161 772 1390

Is private student accommodation good for universities?

Is private student accommodation good for universities?

By this point, the rise of student accommodation as an investment class is not exactly breaking news. Investors from around the world are buying into the sector thanks to the high rental yields, reliable tenancies and relatively low entry points.

The latest UK Student Housing Spotlight report from Savills highlights both the strength and growth of the sector. A total of 68,000 beds were traded in the UK to a total value of £4.5bn in 2016, and the report predicted that the total for 2017 would end up being 75,000 beds traded to a value of £5.3bn. It was also noted that larger portfolio landlords were investing heavily in the sector as well as smaller investors – this sort of diversification is only a good thing.

But one question which hasn’t really been either asked or answered too loudly is whether the proliferation of Purpose-Built Student Accommodation (PBSA) is actually a good thing for universities. On the surface, it would seem to be a negative thing. The greater the number of students who rent privately, the smaller the number of rental payments collected by universities. This could potentially have knock on effects on investment in standard of living as the traditional university halls are starved of funding.

However as always, a deeper look at what is happening somewhat rebuts this. Universities themselves do not actually provide enough accommodation in the first place, necessitating that the vast majority of students must rent privately. Secondly, the halls which are provided are often poorly maintained and overpriced – for instance, the ongoing protests at University College London about the extortionate prices being charged for apartments which are falling apart.

So clearly there is a gap in the market for PBSA which is of a high quality and which is built in large enough quantities to actually meet the needs of the entire student body. The facilities often provided with PBSA – gymnasiums, cinema rooms, on-site management offices, and all the rest – are also generally superior to those found in traditional halls. As the older style becomes unjustifiably expensive for students, it is no surprise that many are looking for these extras to get the best possible value for money.

Many universities have seen how the sector is changing and have begun to work with private providers to implement housing solutions which will benefit their students the most. A great example, provided last week by the Financial Times, is Swansea University which is working with the University Partnerships Programme (UPP) in order to build a new campus containing 2,021 beds.

The payment structure is fairly novel; UPP will pay for the majority of the build and is effectively leasing the campus from Swansea University for 45 years. During this time, UPP will collect rent and be responsible for the maintenance and everything else. Once the lease is over, the building will revert to Swansea University ownership for free.

Professor Iwan Davies of Swansea University has stated that the university is “committed to providing first-class learning, living and social facilities so that we can offer a truly transformational campus student experience combined with a global outlook”. This partnership with UPP seems perfectly calibrated to meet those goals, and the popularity of such schemes is obvious given that UPP have another 16 similar deals in place across the UK.

What this sort of deal shows is that PBSA is not just a passing trend. What might look like at first glance like a market expanding too rapidly for its own good, turns out to be pretty much the model of stability on closer inspection. Given that universities are involving themselves in the process from the beginning – and will actively benefit from it – this is a trend that is here to stay.

If you would like more information about the student accommodation investment opportunities on offer with StudentPodShop, please get in touch today!