As Knight Frank reports, student numbers are rising and in fact a record 41% of 18 year olds in the UK have applied for a full-time bachelor’s degree for the 2020/21 academic year. There were a total of 22,500 more applicants than in the previous year. The important foreign student market is also returning – with a 7.5% increase in applications compared to 2019.
This strong demand for places naturally leads to a demand for student housing. Providing high quality, affordable and well located accommodation is an important part of what any university has to offer. With high student numbers and rising numbers of apartments and applications, the growth in both new buildings and renovations is therefore no surprise.
The purpose-built student dormitory (PBSA) has developed into an independent asset class. In fact, PBSA accounts for 9% of all development funding.
2020 was a record year for investments in PBSA at £ 5.77 billion, according to Savills. This underscores the ability of the PBSA sector to generate attractive and sustainable returns with a high resilience to fluctuations in the overall economy.
At Aldermore, we see investor appetite for dormitory investments leading to increased lending for development and refinancing purposes.
Earlier this year we provided Torsion Developments with a £ 9.6 million real estate development loan for the construction of 91 new studio apartments in Leeds. Located near the University of Leeds, the development will also include a common room, gym, cinema and bicycle storage facility.
More recently, we made a £ 16 million commercial residential investment loan to Kexgill Limited, one of the UK’s largest private providers of student accommodation, typically in dual-use properties. The funds were used to refinance nine student residences in Nottingham and one in Liverpool. This brought our total lending to the customer to £ 46 million.
Aldermore finances a wide range of transaction sizes and provides financing on competitive terms in the form of development loans, investment loans and refinancing facilities. We build flexibility into our solutions as we recognize that circumstances can change as projects develop. We are looking for good, proven operators, reasonable room prices and well-located properties in the area of student dormitories.
We look forward to continuing to support the PBSA sector to meet heavy student demand and build lasting relationships.
John Carter is Aldermore’s Commercial Director, Commercial Real Estate