by Andy Graham
10:28 AM, 27th October 2017, About 5 years ago
Although Purpose built student accommodation in Leicester is nothing new, it is now impossible for any student letting agent in Leicester, or indeed any investor who owns or develops student accommodation in Leicester, to ignore it’s rise in popularity.
The last 5 years have brought significant changes in tuition fees, increasing graduate employment competition, more restrictions around lending as well as the more recent and surprising unfavorable changes to SDLT. For student landlords, these changes have made it even more difficult to make the maths stack up in the private sector. That, combined with the attention institutional investment has shown the student accommodation market in Leicester, and the City Council’s continuing approval of large accommodation schemes in the city centre, has given way to a massive pipeline of PBSA that is no longer supplied by the University of Leicester or De Montfot University. Several thousand beds may be in the making. Student landlords and student letting agents can not ignore this any longer.
Why has PBSA grown in popularity in Leicester?
There is an assumption that purpose built student accommodation appeals only to the luxury student who is happy to shell out £200 a week for additional amenities such as a gym, games rooms and even a swimming pool that is guaranteed to be just a few floors beneath their studio room! However, this is not entirely correct, as PBSA prices start from around £95 per student per week in Leicester. It is fair to say that students have come to expect a certain living standard and PBSA blocks do benefit from having around the clock security, all-inclusive bills and overall, a solution that offers parents complete peace of mind.
Leicester set for massive influx of PBSA bed
It is safe to say that there is strong demand for this type of student accommodation in Leicester. The recent Student Housing Report by Savills suggests that students are increasingly turning to PBSA, and the report claims that PBSA traded a total of 68,000 student beds worth 4.5bn in 2016.
Whilst the forecasts may be optimistic, the investment figures certainly back up the popularity of the PBSA sector. Investment has seen a 17% increase, with foreign investors, staking 64% of the PBSA market, up from 35% in 2014. Most would have thought that the uncertainty around Brexit and the recent snap election would have put off foreign investors, but the opposite is true. As an investment, Brexit left sterling at an attractive buy-in level for foreign money.
Moreover, application statistics suggest that students are favouring the better performing universities who are still seeing some growth (enter Leicester). This means that students are choosing to study at the well-established, top universities for a degree that will give them a competitive, graduate edge. Another emerging factor is the growing number of international students (non-EU) from Asia who can afford luxury accommodation and have an appetite for world class British higher education. The 55,000 students that call Leicester home show no signs of leaving the city any time soon. The University of Leicester (UoL), which is consistently ranked in the top 20, will continue to attract domestic and international (non-EU) students alike. De Montfort (DMU) too can pull in a fair number (16,500), including a significant international contingent (2,497). DMU can accommodate 2,500 students in 8 Halls of Residence, whilst UoL (30,000) accommodate 1,800, predominantly first year students in their Oadby Halls. And with all that in mind, you don’t have to be an analyst to see why Leicester is a good fit for the big (PBSA) boys!
Should local landlords be worried?
Yes and no. Institutional investors who are able to throw money at Leicester’s PBSA market are driving standards up across the entire student property, sector, which can only be seen as a good thing. One new PBSA development offers studios starting from £116 per week for a ‘bronze standard’ en suite, right through to £220 per week for a ‘Platinum’ Studio. Bills are all inclusive and facilities include Sky TV, fun communal areas and free Wi-Fi – satisfying the student shift in priority. De Montfort managed accommodation, on the other hand, is priced at £99 whilst Unite and Liberty Living managed halls range from £95-167. So the killer blow for private landlords, as a direct result of a dramatic increase in supply and standard, is that it could push student rental demand, and prices, down across the private sector. Additionally, every student letting agents in Leicester, as a direct result of this on top of the government’s recent block on charging tenant fees, will be scrambling to keep their head above water.
However, BTL and HMOs still offer flexible and versatile student property investment models in Leicester. PBSA blocks are likely to compete increasingly amongst themselves, primarily for the international and postgraduate market. So the most important takeaway here is that landlords shouldn’t thrown the towel in, but should simply look to safeguard themselves by making some adjustments to their student portfolios.
What should landlords do?
Leicester Landlords can reduce their risk by taking some simple but effective action. The low-cost opportunities include switching to all-inclusive bills and by moving to a student letting agent in Leicester that places a much greater emphasis on customer service, which according to Savills, students value higher than ever before (click here for an example). If a landlord self manages, they must ensure they respond quickly and effectively to maintenance issues, or make sure their letting agent is accountable to do the same. Increasing the standard of their student accommodation by swapping for better furniture, exploring funky designs, adding fixed props and design materials into the house will also make a big difference. Making communal areas more ‘communal’ with the use varied seating, such as breakfast bars, stools, sofas and bean bags will reinforce the image of ‘co-living’. The costlier options include adjusting floorplans to make better use of void space, partitioning to add extra bathrooms or en suites and for some landlords, landscaping the overgrown front and rear gardens. For some more help you can download my ‘2018 Student Landlord Guide’.
Andy is the managing director of Smart Property. Smart Property provide comprehensive property management services, block management, investment opportunities and also offer a long-term rent guarantee service that Property 118 founder Mark Alexander found ‘so impressive’ he decided to invest in the company himself. Please fill in the form below to contact him.