Commercial property: Edinburgh tops UK student flat market

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Demand for student housing is helping to fuel a boom in property transactions, according to research from Cushman & Wakefield.

Edinburgh is the largest market in the UK in this comparatively new, but growing, sector.

Student accommodation stock worth £4.8 billion will be transacted in the UK by the end of the year according to the real estate firm.

In the first half of 2017, £2.41bn was transacted, a 24 per cent increase on the equivalent period last year.

Major deals in Scotland included St Luke’s Terrace, Glasgow and West Granton Campus, Edinburgh, as well as the sale of portfolios with assets north of the border, such as one sold by Unite to Brookfield for 
£295 million in February which included properties in Aberdeen, Edinburgh and Glasgow.

Cushman & Wakefield reports over 1,000 Scottish bed spaces currently being marketed to investors, made up of both operational assets and development opportunities totalling £67m. The combined worth is in the region of £80m and includes Wellgate House in Edinburgh and Peterson Hall, Dundee.

Mike Mitchell, partner in Cushman & Wakefield’s student and residential investment team, says: “Across the UK, the purpose-built student accommodation (PBSA) market continues to be one of the most attractive asset classes in real estate for investors.

“Due to the value of foreign currencies against the pound, there has been a further influx of capital from overseas buyers in 2017.”

Recent deals have attracted investors from the Middle East, Singapore, China and Russia.

David Feeney, associate in the student accommodation advisory team at Cushman & Wakefield sees no let-up in demand.

He says: “More students than ever are demanding a bed in purpose-built contemporary accommodation, gone are the days of students squeezing into cramped rooms in gloomy halls of residence or living in mouldy flats.

“This, coupled with pressure on local housing markets, means that demand for purpose-built accommodation should remain strong.”

He believes councils are keen to get students out of the private rental sector to release this pressure and are therefore open to student accommodation developments.

Feeney says: “Micro-market knowledge is essential to investment success – for example, although Glasgow overall hasn’t seen student rent rises, well-located and well-priced schemes are continuing to do well and offer a good return for investors.

“Outwith Glasgow and Edinburgh there are areas worth considering such as Perth and Stirling, where quality accommodation is in high demand.” Feeney says that the market has definitely matured over the last five years and yields are steady.

He says: “Developers need to do meticulously research into market needs however.

“In areas where lots of high-price studios have been built, the take-up has sometimes not been good. Students tend to prefer communal areas so fewer bedrooms and bigger social spaces are a good idea.”

Developers should start from the price that students are willing to pay and work backwards to assess viability.

Peripheral sites can look attractive because of their lower price, particularly compared to high central values of cities such as Edinburgh, but Feeney says students have a very set idea of how far they want to travel.

“Anywhere outside 20 minutes walk to the university becomes problematic so we would always advise a developer to consider a more central location, with perhaps smaller rooms to lower the cost.

“Students will always look to location first when choosing where to live.”