The student accommodation sector is one of the best performing asset classes in the property world. Private student accommodation providers are seeking to maximise returns by raising students’ expectations.
The performance of student property over the last few years, in spite of a rise is university fees and rising living costs, has been exceptional.
According to James Pullan, Head of Student Property at Knight Frank, student property “has outperformed every other commercial property class.”
James believes that this is in part down to the rise in student fees, which prompts “a ‘flight to quality’ by students.”
Despite a significant uplift in the number of people applying for tertiary education, according to James “there is still a structural undersupply of purpose-built student accommodation in the UK.”
It is that undersupply which makes the sector so attractive to the nouveaux generation of student accommodation providers, who aim to please with their design-led schemes. So – gone are the days of students sleeping on broken mattresses or doing their own redecorating; good interiors and quality furnishing are now vital.
“Landlords are finding that students demand higher quality properties than they have in the past and good furnishing has become more important,” says Nicholas Gill, CEO at David Phillips.
“Of all the asset classes in the property sector, I would say that student accommodation has the greatest need for furnishing,” says Nicholas.
“Students simply will not rent a property that is unfurnished.”
This is no surprise in a market where the tenancies are shorter and the tenants are poorer. And even if students were to buy furniture, the thought of having to pay for removals costs after they graduate is the last thing on their mind. But it is the quality of furniture that the new providers are asking for which surprises.
“Whereas in the past landlords were content providing basic furniture, the landlords that are approaching us now want high quality furnishings,” says Nicholas.
“They see it as a key differentiator that will enable them to generate higher returns.”
Martin Bartlett, Managing Director at Peelmount, the specialist universities furnishing contractors that recently merged with David Phillips, is receiving an increasing number of requests for design-led furnishing.
“There is a bank of new student accommodation providers who consider design to be important,” says Martin.
“We are involved in a design-led project up in Scotland called Tramworks by Student Living. They are a growing provider with three or four projects on the go.
“Most of the new players see design as a key selling point, and accommodation is becoming really trendy, finished almost like a city apartment. And the providers are changing the rents to go with it.”
New design-led accommodation is becoming a lifestyle choice for students, with many now choosing between private student accommodation providers and university halls of residence.
“At the moment, the majority of first year students still live in university halls of residence,” says Martin.
“For second and third year students, however, there is certainly a trend away from HMOs to purpose-built private student accommodation. The days of having back streets two up, two down student houses is disappearing quite quickly.
“A lot of the larger private blocks that we see will have a gym, a games room; they might even have a cinema and a bar. The students that live there are getting a campus experience.
“Because they are paying with their student loan or the ‘bank of mum and dad’ are paying, they are quite happy to spend more for quality accommodation that has all of the facilities to go with it.
“With the budget cuts, many universities are struggling to invest in student accommodation opening the door for increased private sector involvement. To ease the financial burden on our university clients, recently, we successfully applied for a framework agreement with London Universities Purchasing Consortium for the supply of White Goods, Student Starter Packs and Window Coverings.”