The Knight Frank View: Our opinion is that professionally managed student accommodation will provide one of the most excitingprospects in the UK property market over the next three years; we believe that the potential for both capitaland rental growth is well above the level we are anticipating for the mainstream residential and commercialproperty sectors.

Set against this very positive view is a warning for new entrants – the risk of oversupply of accommodation isalways present in this sector. Thorough local market research is of critical importance due to the size and scaleof new build proposals. The winners over the next few years will be those operators who are able to identifyunder supplied locations, and act quickly to deliver product before competitors respond. The weakening citycentre apartment market offers the potential for site acquisition which could bode well for those looking for arapid response to opportunities.

For those interested in the central London market in particular, a clear understanding of the internationalstudent market will pay dividends. The rewards for designing and delivering a product which appeals to highvalue international students are obvious – whilst the prime student market In London typically sees values of£700 to £900 per sq ft being achieved, rental levels and investment yields are pointing towards capital valuesbreaching the £1,200 per sq ft barrier in Bloomsbury. We believe that the £1,500 per sq ft barrier may bebroken over the next two years.

Over the following pages we explain the key fundamentals underpinning the market and point to the mainareas for potential growth in both demand and pricing. In summary we believe that investors and developerswould be best advised to concentrate on the larger regional centres and to shift towards higher productspecification. There is a significant opportunity in this sector – but understanding local market permutationshas become critical and those operators who take time to research gaps in the supply pipeline will performwell over the next few years.

Read the full Knight Frank article below:

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Residential Research: Student Accomodation Review 2008 PDF

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