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Data from the latest National Student Accommodation Survey suggests that almost 90% of students choose to reside in student accommodation while at university; with student accommodation standards at an all-time high, it is no longer considered something of a ‘necessary evil’ by those studying away from home.
The student accommodation sector continues to represent an attractive investment prospect, but as with all investment opportunities there are pros and cons to consider before entering this segment of the market.
Purpose-Built Student Accommodation (PBSA)
Purpose-built student accommodation is becoming the preferred choice for the majority of students. These are the modern and usually relatively upmarket developments that feature amenities like shared working spaces, on-site security, fast internet, gymnasiums, bicycle parks and so on.
As it is built for purpose, they are designed to satisfy students’ requirements for the entirety of their stay; due to their desirability, it is also becoming the preferred choice for investors looking to capitalise on strong demand.
Traditional student houses with multiple tenants are still a popular choice.
Pros of Investing in PBSA
The biggest benefits of investing in purpose-built student accommodation are as follows:
- Consistently high demand – As the preferred accommodation choice for most students, there is strong and consistent demand in most key areas of the country.
- Strong market performance – This segment of the real estate market continues to perform strongly, having once again seen a record-breaking year in 2020.
- Desirable locations – Most modern PBSA developments occupy strategic positions in desirable locations, close to universities, cities and transport links.
- Managed buildings – The inclusion of security, maintenance and general building management services means fewer responsibilities for the investor.
- Excellent retention rates – Students who check in to PBSA developments are significantly more likely to stick around until the end of their studies than those in HMOs.
- Flexible options available – Individual living spaces within a PBSA are available in a limitless range of shapes, sizes and specifications to suit most budgets.
Cons of Investing in PBSA
- Higher prices – The more desirable, upmarket and amenity-rich the PBSA, the higher the purchase price for the investor.
- Mortgage option – There are few options for taking out a mortgage on a PBSA, which means that the investor has to pay for everything up front.
- Resale values – While most solid PBSA investments will hold onto their value indefinitely, residential properties usually see much stronger capital growth.
- Additional costs – Added services and amenities like security and building maintenance incur additional costs that are usually picked up by the property owners.
Key Considerations
All types of classical and contemporary student accommodation have the potential to generate generous and reliable revenues. Key factors to consider that ensure the best possible ROI include the quality of the building, its facilities and whether there are any additional ongoing management/maintenance costs to cover.
Seeking the support of an experienced broker at an early stage can also help you build a detailed picture of the options available and which are the best investments to suit your objectives.
