Soaring demand for student accommodation and luxury commercial spaces driving up market recovery in real estate sector
In the heart of Britain, the buzz surrounding commercial real estate is back, and it's all about student accommodation and top-notch sustainable office spaces. Thanks to a thriving student population and shifting work trends, the market appears to be on the mend after inflationary woes, tax nightmares, and regulatory hurdles.
Together's latest report, Cities in focus 2025, suggests that the private sector will play a crucial role in bridging the gap as universities grapple with financial challenges and government funding remains frozen. The report identifies student accommodation as one of the main pillars of the UK's commercial property resurgence, alongside office and retail spaces.
This demand for student housing stems from the consistent need for modern, well-appointed student residences from both universities and students. The city of Manchester, in particular, stands out as an attractive investment destination, boasting a robust demand that promises more opportunity for eager investors. The average monthly private rent in Manchester currently hovers around £1,310, having climbed significantly over the past decade or so. Adding to the allure, demand for houses in multiple occupation and co-living spaces is on the rise.
Meanwhile, the post-pandemic switch to hybrid or full-time office-based work looks here to stay. Four out of five industry bigwigs surveyed believe offices represent a lucrative property investment opportunity over the next five years. However, businesses aren't content with just any office space; they're seeking high-quality premises (Prime and Grade A), while showing little interest in lower-tier options (Grade B and C).
Sustainability is another key factor driving this trend, as businesses grow more eco-conscious and implement measures to decrease their carbon footprint. In addition, companies are hunting for office spaces that cater to hybrid working patterns, lower overheads, modern amenities, and the latest technology upgrades.
Wellness-focused renovations are also in high demand, with businesses emphasizing air quality, natural light, fitness facilities, and communal spaces to promote employee wellbeing. This focus on health-conscious designs aims to attract and retain top talent. Achieving sustainability and ESG commitments is another crucial aspect, with investors favoring green buildings.
The commercial revival is evident, with capital and rental values edging up modestly. Sectors like retail, industrial, living (residential and student accommodation), and prime office assets are leading the charge. The revival is underpinned by rising capital and rental values, ongoing modernization trends, strategic emphasis on sustainability and wellness-oriented spaces that cater to evolving business and workforce needs.
So, is Savills correct in expecting a commercial property revival in 2025? The signs certainly point to a resilient and enduring renaissance in the UK commercial real estate market.
Investors might find opportunities in insurance products that cover property investments, such as student accommodations in Manchester, considering the robust demand and promising returns. As companies prioritize sustainable and wellness-oriented office spaces, the sports industry could collaborate by incorporating sports facilities within these premises, attracting health-conscious businesses and employees alike.
