By Emanuela Barbiroglio

Student accommodation rents continue to climb

Purpose-built student accommodation (PBSA) rents are up by 2.55% for the upcoming academic year, with the strongest growth coming at the more affordable end of the market, according to Knight Frank’s Student Property Index.

The index, which tracks rents across 75 towns and cities on a room-by-room basis, reveals that the steepest growth is for rooms with shared kitchen facilities, as opposed to self-contained studios.

James Pullan, head of student property at Knight Frank, says this reflects higher levels of demand for cheaper rooms. “Affordability will be a key theme for the next few years,” he says.

Rents are on the increase in 95% of the markets in the index. However, it uncovers considerable variations between different cities.

'Emerging markets'

Some of the highest rental growth is in towns that Knight Frank characterises as ‘emerging markets’, which have good universities but a lack of PBSA stock, often because of stringent planning regimes. Bath falls into this category, with 4.92% rental growth in 2017-18.

Other strong-performing towns are ‘core markets’, which have benefited from large increases in student numbers and relatively limited development. Manchester and Birmingham, for example, deliver rental growth of 3.12% and 3.18% respectively.

At the opposite end of the spectrum are ‘mature markets’ with large numbers of students but high levels of development in recent years, such as Newcastle, where rents are up just 0.85% for 2017-18. The other category identified by Knight Frank is ‘price-sensitive markets’, which lack demand for luxury stock and where rental growth is significantly higher for affordable rooms, such as Nottingham and Glasgow.

Despite a strong development pipeline – 39,000 student beds are currently under construction – and the threat of Brexit, Knight Frank is positive about the outlook for the sector.

Pullan predicts that “if supply is targeted correctly at the largest group of occupier demand, then consistent rental growth will continue to be achieved”.

Liberty Living’s investment director Peter Cross adds: “We believe in the long-term prospects of the student accommodation market and see the highest demand concentrated in major UK university cities, from students requiring well-priced en-suite accommodation.”

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