INVESTMENT in hotels and student accommodation in Scotland’s central belt will benefit from record levels of investment this year, according to analysis from real estate consultancy Knight Frank.
Several high profile developments are underway in both Glasgow and Edinburgh, and indications are that more is to follow.
Knight Frank research predicts that investment in specialist property – which covers hotels, healthcare, student accommodation and automotive – across the UK will reach £14.3 billion in 2016, up ten per cent on last year.
In 2015, the sector represented 18.3 per cent of all UK commercial property spend – its largest-ever slice of total funding.
John Rae, partner and head of Knight Frank’s Glasgow office, said the student accommodation market in Glasgow was “absolutely buoyant”.
With five universities, the city is hugely attractive for investors like Select Property Group.
The company’s purchase of a 2.9 acre site on Beith Street, near the University of Glasgow, for a £67 million development that is due to take its first residents in September, is a clear illustration of the confidence in this market.
“Although supply is picking up, we predict investment levels will continue to grow in 2016,” said Mr Rae.
Trevor Moore, chief executive of Select Property division Vita Student said students are more demanding in their requirements for accommodation. “They don’t want to be in the suburbs, they want a central location. Gone are the days when students accept ‘The Young Ones’ style living conditions; they want a place they’re proud to call home.”
Another developer, Empiric Student Property, was also prolific in the city last year, striking a £9.6m deal to acquire the freehold of a vacant office building near the University of Strathclyde’s John Anderson campus.
The investment house also snapped up the Ballet School in Glasgow’s west end for £12m in March 2015, which houses 103 students.
And it’s not just student residence that is bringing new developments to Glasgow. Ken McCulloch’s Dakota group will soon open Dakota Deluxe on West Regent St. Travelodge has also opened a 171-room venue on Queen Street after a £13m investment.
In both Glasgow and Edinburgh, the average hotel room rate (ARR) has grown for the fourth consecutive quarter. Figures from tourism research firm LJ Research showed hoteliers in Glasgow and Edinburgh achieved increases in ARR of 7.8% (to £74.29) and 10.8% (to £92.12), respectively. Occupancy rate in Glasgow was 79 per cent in March, down 3.8 per cent on March 2015. Edinburgh was steady at 75 per cent.
In Edinburgh, Alasdair Steele, partner and head of Knight Frank’s Edinburgh office, said the hotel sector was “very strong”, and the Scottish capital remained an attractive proposition for investment in specialist property.
“It’s a Unesco World Heritage site, which places a limit on supply, and it attracts in excess of 3.5 million visitors per year – the most in the UK outside of London,” he said. “On top of that, the city has a strong business traveller demographic and the small matter of the world’s largest arts festival every summer.”
Among a number of developments announced in Edinburgh this year, Hilton confirmed in February that it is building a 228-room hotel in Fountainbridge, while Premier Inn announced a £35m investment in the capital with three new premises and ongoing refurbishments.
Several high-profile student accommodation projects have also started in 2016, including Crosslane Student Developments and Unite UK Student Accommodation Fund’s £6.2m investment in a 237 bed property at Lutton Place.
“Out of a total population of 486,000 we have 56,415 students, meaning more than one-in-ten people in the city are undergrads or postgrads – compared with 3.6 per cent across the UK,” said Mr Steele.
As a result, he said the demand for student flats in the city shows no sign of abating. “We only see more hotel and student accommodation occupiers taking up space in the capital, with investment to match,” he added.
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