Leeds tops UK student rental growth

Student accommodation in Leeds had the highest annual rental growth among regional university cities during the academic year 2019/20, according to Knight Frank. As a mature market with a large number of students, Leeds has seen high levels of development in recent years, but it was still able to report rental growth of 4.62%. It was followed by Colchester (4.47%) and Derby (4.24%). The UK average was 2.36%, up from 2.26% in 2018/19. Knight Frank’s report examined rental growth of university and privately-owned purpose-built student accommodation in the top 40 largest markets. Rents rose in 89% of the cities surveyed, with increases focused on cities with growing student populations and modest delivery pipelines. Oversupplied markets saw lower or flat rental growth. For example, rents in Sheffield grew by just 1.36% owing to the large amount of supply released to the market in recent years. Rents for PBSA fell in Plymouth and Sunderland, due to a decline in their student populations. Knight Frank said the number of students in the UK was likely to remain constant over the next two years, and there was a large opportunity in the second- and third-year student markets. Affordable bedrooms with shared facilities achieved greater rental growth, compared with more costly private studios. Rents grew by 2.46% for clustered en suite rooms, 2.3% for clustered rooms without en suite facilities, and 2.13% for studio flats. In Leeds, this divide was more pronounced: rents for clustered en suite rooms rose by 4.97%, clustered non-en suite by 4.25% and studios by 3.08%. This trend was also noted in transition markets, such as Plymouth, where students are opting for bargains amid a boom in development and a drop in student numbers. Rental increases for studios were focused in markets with constrained supply, such as Bath, where they grew by 4.63%. Rental growth at university-owned and managed schemes and private schemes with nominations was higher than direct market growth, which is typically priced higher and less competitive. Unite on affordability and growth Nick Hayes, group property director at Unite Students “Widening [university] participation has led to more applicants from lower socio-economic backgrounds and a greater weight of students that want access to rooms that are more affordable. “We have a high proportion of rooms in nominations agreements with universities – around 60% of our portfolio – and this along with record satisfaction levels among both universities and students reflects how effective we are at delivering value. We have also reduced our exposure to studio flats, which account for around 8% of our portfolio. “In time, we plan to move away from rental growth as a measure of performance and to focus more on optimising our earnings and income generation in other ways. That may be through a combination of increasing summer lets and short-term lets, alongside efficiencies as our portfolio grows or putting more focus on income from our commercial estate. “A lower price offering at the start of the cycle can also act as a gauge of demand for a building which allows us to better understand what the market price should be by the end of the letting cycle.”   To send feedback, e-mail emma.rosser@egi.co.uk or tweet @EmmaARosser or @estatesgazette