The Purpose-Built Student Accommodation opportunity: an investor's perspective

AH: That's a pattern we recognise. For those schemes that perform strongly, it often comes down to location and operator quality. When deals do come unstuck, it tends to be those where investors have prioritised yield on paper over genuine understanding of student behaviour and local dynamics. Can you talk about the significance of international students in this market?

SC: They are hugely important. Until COVID, international students probably occupied about 80% of my bedrooms. Today, it’s about half that.

And international students tend to be a lot less price-sensitive than UK students. Since COVID, they've been replaced by UK students, so rents in some towns have gone sideways for five years.

AH: That repricing is something we factor into our assessment of new opportunities. Schemes underwritten on assumptions of continuous rental growth, particularly at the premium end, carry more risk than those with realistic, sustainable pricing. It reinforces the importance of understanding your tenant base.

What's interesting for investors in the £3-10 million space is that there are opportunities emerging, including assets that larger players find too small or too operationally intensive, but where an experienced operator can add real value. What’s the skillset that’s required?

SC: The large players don't look at individual buildings; they buy thousands of bedrooms at once. If they can't do something at huge scale, they're not interested.

I know of sites that have been on the market for ages because the big operators won't touch them, perhaps because they need refurbishment. But if I owned them, I could see exactly how to repurpose them. That hands-on approach is where smaller investors can compete.

AH: That service element is increasingly important in how we assess operators. The physical asset matters, but so does the management capability behind it. A well-run scheme with strong retention will outperform a newer building with poor service.

Sustainability is also increasingly central to how we assess real estate opportunities, both from a regulatory perspective and in terms of long-term asset value. EPC requirements are tightening, and we're seeing more investors factor energy performance into their acquisition criteria. Are you seeing a green premium in the market from students themselves?

SC: In my experience, students aren't making decisions based on sustainability. They're more concerned about the location and facilities.

Sustainability is being driven more by banks and building regulations, which are helping to push the sector towards higher standards and EPC ratings of A or B.

AH: Clearly, the drive toward better environmental standards is right, but these requirements cost more, which can impact viability, particularly for smaller schemes.

We see that tension regularly and Building Safety Act requirements add another layer of cost. How is that affecting development?

SC: Fire safety has changed dramatically. Now we’re seeing new requirements on things like electrics and fire-retardant materials every single year.

For example, until recently, if a building was below 18 metres tall, you didn't need sprinklers. Now that’s been cut to 11 metres, which is a significant added cost for developers and another factor to consider in the viability equation.