Knight Frank's Bricks & Mortarboard Student Accommodation Review ranks Edinburgh above other rival UK cities including all parts of London, Newcastle, Birmingham and Manchester, as the best investment location for student residences.
The student accommodation sector offers investors and developers an attractive alternative opportunity, with student accommodation predicted to outperform most other property sub-sectors over the next three years, yielding annual total returns of 12%. These encouraging prospects are the result of a predicted rise in total student numbers and rental levels in privately operated halls - student population could go up 2.9% per annum and rents by 4.5% per annum.
Average weekly rents for student accommodation have increased to £82 in 2006/07 (from £67 in 2003/04), representing an average annual increase of 5.2%
Knight Frank forecasts that in the next three years, student accommodation rents will continue to show strong growth of more than 4.5% per annum.
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Student accommodation has performed strongly over recent years with total annualised returns of 10.2% over five years and 12.2% over three years, a stronger performance than the retail, industrial and residential property sectors. Knight Frank predicts that over the next three years, a similar outperformance of this sector will be seen.
Drew Oswald, managing partner, Knight Frank Scotland, said: "As one of the UK's biggest university cities, it's no surprise that Edinburgh scored top marks in Knight Frank's Bricks & Mortarboard Student Accommodation Review.
"Edinburgh has fared well due to a continuing demand for student accommodation in the city, and the opportunity to create high density developments and lower unit costs mean that the provision of student accommodation is an attractive investment opportunity. Combined with a good product and a lower risk profile, the student accommodation sector is attracting more and more informed investors and developers to Scottish cities such as Edinburgh."
The report also highlights that the five leaders (by market share) within the private operated halls sub sector currently account for approximately two-thirds (66%) of all bed spaces with UNITE plc, leading the market with 37,522 bed spaces across the UK, ahead of UPP, Opal, Liberty Living, and Victoria Halls.
Tim Mitchell, Group Property Director at UNITE said: "There is still a massive demand and supply imbalance within the student accommodation sector. The growing number of University applications each year, the increasing number of international students choosing to study in the UK and changes in government policy are all increasing the demand for student accommodation."
Tim Goddard, head of student property, Knight Frank added: "The student accommodation market is still embryonic and whilst there has been substantial growth in development volumes, the number of active participants in the market is still limited. Private operated halls have seen the greatest growth in the market share. In 2005, this type of accommodation accounted for around 7% of all bed spaces and this figure has grown to around 10% in 2007."
(GK/JM)
