March 26th, 2020
It’s hard to put your finger on exactly when it was that boutique student accommodation, or Purpose Built Student Accommodation (PBSA) started to become the dominant force in this asset class, but we’re probably moving somewhere back about a decade.
It’s been probably five years now since it emerged from being something of a niche to full blown mainstream investment avenue, and that was triggered by a number of enormous international funds becoming involved and buying vast student accommodation estates all across the UK and, more recently, Europe.
Following that, private investment began to flow in at roughly the same time and now there are thousands of smaller landlords and property portfolio owners, as well as individuals.
It became apparent that yields, entry price and capital gains were quickly outperforming almost all other asset classes within the industry, and this attracted investors in their droves. There was also an almost exponential rise in new properties coming to the market all across the country as more and more became university, college or student towns.
This trend has been increasing, and we’re now seeing more innovative conversions for properties that would have otherwise laid empty. Despite issues with Covid-19 and the closing of many universities in the short term, it’s become apparent that many developers will try to use this time to look at new sites and new potential conversions.
Increasingly these new sites have been sourced on high streets where larger businesses have been struggling for some time, and have already seen high profile closures such as those of BHS and Woolworths.
Larger empty retail space is, broadly speaking, unsuitable for re-purposing for anything other than niche retail reasons. These property owners often struggle in this case to either sell on or rent the premises back out.
With this in mind, it’s often that they’re then bought up and renovated into PBSA within towns that have flourishing student populations.
For example, The Guardian ran a piece in September about House of Fraser in Wolverhampton city centre that was due to be converted into either student accommodation or lecture halls. The property was sold for £3 million, which in terms of commercial property prices is fairly low, given the location and history.
The building had been retail space as far back as 1877 when it was established as the Beatties, first in a chain of stores before being taken over by House of Fraser in 2005.
It represents, in many respects, a perfect example of the changing face of many town and city centres that have focused their economies on student populations that are now moving and spreading out across the country, rather than in concentrated pods in major cities.
Cities like Wolverhampton have now re-focused their local economies for the future, and for many similar places that lies in servicing a growing student population.
More and more PBSA investors are beginning to see that these areas represent incredible value in a property market often dominated by residential and buy-to-let investments where the entry price is high and yields aren’t quite as stable.
Tenancy rates in PBSA are so often more stable too, meaning that PBSA is now becoming, for many, the asset class of choice and along with the changing face of the high street this seems to be a change worth embracing.
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