CBRE: Test ahead for student housing

The student accommodation sector has proven resilient during the recession years, although the post-election age of austerity is likely to create some challenges, writes Nick Mullins, senior director of valuation advisory and investment consulting at CB Richard Ellis.

Ongoing uncertainty, along with more restrictive planning regimes in some cities may potentially affect the development pipeline, although the volume of students in the key university towns in the North West, including Manchester, Liverpool, Preston and Lancaster, remain robust. As such, solid opportunities remain where there is a clear demand and supply imbalance.

Overall supply of good quality stock has remained largely muted in the North West over the last two years with relative inactivity due to the economic environment and high land prices. However, developers are once again seeking opportunities, particularly in areas considered low-risk where the supply and demand mismatch is considered to be overt.

Demand from investors has also been restricted, particularly in cases where there is no arrangement with a university and therefore no rental security. Variety remains a key factor going forward. The provision of a range of accommodation within a single scheme is generally considered to help reduce investment risk by ensuring higher occupancy.

The key challenge for private sector developers is the tightening of development controls. However, with pressure on the universities to manage costs but with a continued need to improve existing accommodation to help maintain student numbers, there must be a role for the private sector to play in helping to deliver modern, high quality accommodation in partnership with the universities and local authorities. Approximately 50% of the total managed stock in Manchester is not up to modern standards and it is only a matter of time before the quality of the accommodation starts to become more of a defining factor in students' decision-making on which university to attend.

Student AccomodationPlace North West is hosting a half-day conference looking at the current state of the student accommodation market on 17 March. The event is sponsored by CBRE, Sheppard Robson, Rider Levett Bucknall and Hill Dickinson. Click here for details

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