By Charles Ferguson-Davie
We were one of the first investors in UK student housing, entering the sector in 1997, as we recognised that the drive to encourage higher education would result in demand for higher quality accommodation that could not be satisfied by university-provided halls of residence.
The sector has grown significantly since then and matured immensely, with a number of sophisticated operators active in the market, which is attracting an ever-growing weight of institutional capital. Investors are drawn by the promise of long-term, inflation-linked income streams in a sector supported by structural demand drivers.
Our student housing strategy has since expanded from solely investing in purpose-built student accommodation (PBSA) to now also include the HMO market, which has many of the same attractive market fundamentals as PBSA plus some added benefits. Principally this is driven by the fact that the HMO market is still three times as big as the PBSA sector, but generally delivers a poor service to students with plenty of room for improvement. Investing in HMOs can also generate a higher income return than PBSA while avoiding the need to develop, which carries more risk.
MREIT, our new residential-for-rent vehicle, will target this exciting sub-sector, which is marked by low levels of institutional penetration and professional involvement, alongside single-family homes for rent, where we are also looking to provide a better experience to renters.
There is also a positive environmental story in the decarbonising of existing housing stock through energy efficiency improvements rather than being responsible for the carbon footprint of new-build development.
Crucially, being active in both the purpose-built and HMO segments of the student housing market means that we are catering to both domestic and international students and able to offer a more affordable price-point to students.