The latest UK Student Accommodation Report compiled by a commercial property agent shows a 19.4% annual increase in rents in Glasgow.
In mid-2016 I hosted a round table discussion with some major players in the student accommodation sector, following on from having been involved in the Scottish end of a high profile circa £400 million disposal of a student accommodation portfolio by an offshore fund to a Singaporean based investor. At the time of the round table, however, the Glasgow student accommodation market was saturated, with the focus being on Edinburgh where there is invariably a paucity of suitable property stock. The student accommodation asset class has, however, remained a stable and buoyant asset class, and winding the clock forward has seen specialist PBSA intermediaries such as Beachrock enter the market, and for the period from 2022/23 to 2023/24 has been the strongest year for UK rental growth in the history of the student accommodation sector, with Glasgow leading the way.
The latest UK Student Accommodation Report compiled by a commercial property agent shows a 19.4% annual increase in rents in Glasgow, with Edinburgh experiencing growth of 11.2% and Aberdeen an 8.4% increase.
In the past decade, the number of full-time students has risen by 22,155 in Glasgow and by 16,645 in Edinburgh. In the last three years alone, in part due to changes available to courses in demand from the far east, Glasgow’s student population has risen by 12,220 - second only to London in growth terms - with Edinburgh not far behind with 7,085 additional students.
The demand/supply imbalance for student accommodation is, as a consequence, now significant, and as mentioned below will be compounded by increasing new build out costs.
No other city in the UK has experienced such growth in rents in the last two years as Glasgow, and while private rents are still below Edinburgh, direct let room cost more in Glasgow for the first time and are actually on a par with some outer London areas.
From the Report, supply forecasts remain concerning, with just 12,195 new beds opening for 2023/24 - the lowest annual figure for student accommodation delivery for 10 years.
No new beds have opened in markets including Glasgow, Manchester and Bristol, with only just over 330 new beds opening in London. Just four further markets - Nottingham, Edinburgh, Leeds and Colchester - account for nearly half of all new supply.
At the end of August, of the 38 available direct let schemes in Glasgow, 30 were sold out. In Edinburgh, 35 of the 45 were sold out.
At occupancy rates of 79% and 78% respectively, these sat ahead of all other UK locations, other than Bristol, which comprised 83% occupancy.
The quality of accommodation is increasing, with the provision of greater facilities, but the report pointed to concerns regarding affordability, with evidence of students unwilling to pay for a bed at any price with higher cost beds generally absorbed by the overseas student market.
Rising operational and development costs, high inflation, and a decline in new bed delivery has driven rental growth for both university and private sector accommodation which may see a focus on repurposing or refurbishing existing property stock.
The average weekly private sector rent across the UK - excluding London - is now £174.45, with the average university rent at £158.57.
According to one commentator in Scotland, “From an investor perspective, interest remains largely focused on prime, modern assets of £30m to £100m lot sizes, as well as older, well-located stock with strong refurbishment angles.
“Fundings remain popular, despite increased recent debt challenges, as the market is usually dominated by international institutional buyers; although of late there is increased competition from home grown entities.”
Andrew acts for a number of high profile clients and regularly advises on the Scottish property aspects of cross-border transactions.
