New figures have shown that UK student property investment levels are rising. This, in property expert Simon Morris’ opinion, shows how investors can benefit from the alternative sector of the UK’s commercial property market.
The alternative property sector
Investment in the UK’s commercial property market has traditionally been based on the office, industrial and retail sectors. However, investors are increasingly investing capital into alternative property classes such as student accommodation and nursing homes. The student market has become particularly lucrative; new research from Paragon has shown that shared student houses generate average yields of 6.45%, against an average of 6.2% for all other tenants.
Investment hits nearly £4 billion
Figures from commercial property advisor CBRE have shown that investors are coming to recognise the value of the UK’s student property market. Property Wire reported that CBRE’s research found that investment levels in the UK’s student property sector climbed to £3.98 billion in the first six months of 2015. In contrast, investment levels in the UK’s student property sector only reached £2.35 billion throughout the whole of 2014.
Furthermore, CBRE’s statistics illustrate that student property investment in London climbed to a staggering £1.98 billion in the first six months of this year. Simon Morris recently suggested that the government’s emergency budget may boost London property development. This could allow the UK capital’s student accommodation market to continue recording impressive investment levels throughout the latter half of 2015.
Demand and supply
There is a very good reason that London/UK property developers may choose to focus on student accommodation. Data shows that there is a continued lack of student housing across the UK, but demand for student property in university towns is rising. The head of student housing advisory at CBRE, Jo Winchester, commented on this trend. She said:
“So long as demand outstrips supply, upward pressure on both rents and capital values will continue to make the market an attractive proposition for investors, and we don’t expect the market to come off the boil for some time.”
Research before investing
This suggests that student accommodation and other alternative property classes which are experiencing similar demand/supply ratios would make good investment opportunities. However, Simon Morris would advise investors to do their research before they invest in alternative property, so they can make an informed decision on how to expand their property investment portfolio most effectively.