UK student property
providing consistent returns for real estate investors, report
Student properties in the UK have delivered consistently
healthy returns over the past five years, according to the
first industry benchmark to accurately track performance in
Total annual returns from student accommodation hit 13.5%
in September 2010 and average rents for investment class student
accommodation rose 2.2% across England and Wales in the year
to September 2010, according to the Knight Frank Student Accommodation
But there were regional variations. Average rents in London
fell back over the period by an average of 3.6%, whereas rents
for regional cities rose by 4.1%. Investment returns across
England and Wales fell back from 6.56% in September 2009 to
6.25% in September 2010 while current investment yields stand
at 6% in London and 6.5% in the regions, the index shows.
‘Student property has delivered consistently healthy
returns over the past five years. The sector avoided the crash
in both capital values and rentals seen in the wider commercial
and residential sectors in 2008 and early 2009,’ said
James Pullan, Knight Frank’s head of student property.
‘Across England and Wales rents have continued to rise
into the 2010/11 academic year by 2.2% on average, reflecting
the strong demand for accommodation from a rising student
population, but also the ongoing process of improvement and
enhancement being undertaken by the student accommodation
operators,’ he explained.
‘Investors are looking increasingly favourably on the
sector as they are attracted by what are perceived to be the
contra cyclical properties of investing in Education. Specifically
investors are seeking security of income and the wider investment
case offered by student property and this is demonstrated
by the sharpening of yields over the past 12 months by over
30 basis points from 6.56% to 6.25% in the 12 months between
September 2009 to September 2010,’ he added.
The report also shows that full occupancy is a characteristic
of the sector. In the regions outside London rents have risen
by around 4.1% over the last academic year. In London there
has been some pressure on the high end stock which has resulted
in an overall fall of rents this year.
The general outlook for rents is of continued pressure for
annual growth with undersupply of student accommodation still
a pronounced feature in most markets. ‘In London we
project a stabilisation of rents over the forthcoming year
with developers targeting strategically accessible transport
hubs to provide high quality accommodation at sustainable
rents,’ said Pullan.
‘With total returns at 13.5% in September the sector
is continuing to deliver strong and stable performance for
investors. The outlook for 2011 is extremely positive. The
sector is well positioned to deliver stable and sustainable
returns against a turbulent economic backdrop,’ he added.
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