Contrary to what most student landlords might believe, student
accommodation and Build to Rent (BTR) have been flagged up as the most
secure investment options in 2025.
That’s according to Excellion Capital’s Investment Yields Index which
reveals that these sectors boast yields below 5%, signalling high asset
values and stable income streams, while retail and leisure sectors offer
higher yields for those willing to embrace risk.
The firm says that properties with low yields are highly sought after for
their predictability and ability to secure cost-effective financing –
though it also admits that this is a ‘quirk’ of the property investment
sector.
Residential assets, such as
student housing
and BTR, dominate this category, benefiting from lower lending margins as
banks require less regulatory capital for these loans, the firm says.
Student accommodation leads with an average yield of 4.3%, down 0.25% from
last year.
Prime London student housing yields 4%, while regional prime markets offer
4.25%.
Quirk of the investment market
The firm’s vice president of real estate, Robert Sadler, said: “For
property investors, yields must be considered with real nuance.
“Low-yield assets are often considered as the most lender-friendly because
they indicate a high asset value, steady and reliable income and,
therefore, relatively low risk.
“However, the lower the yield the lower the quantum of debt that can be
supported by the asset.”
He added: “Lenders are most concerned with the long-term value of an asset
rather than the income it generates, they’re going to be far more willing
to lend at attractive rates, albeit lower leverage, for low-yield assets
and be incredibly wary of the more unpredictable, erratic high-yield
concerns of the market.
“It’s certainly a quirk of the real estate investment market that higher
income relative to asset value is not always seen as a good thing.”
BTR delivers 4.5% yields
The data shows that the BTR sector delivers consistent yields of 4.5%
nationally, with Greater London’s prime market at 4.25%.
Regional single-family BTR and Tier 1 regional city BTR also yield 4.5%,
while Tier 2 regional cities average 4.75%.
Other notable low-yield sectors include prime London co-living at 4.25%,
Greater London industrial estates at 4.75%, and London’s private rented
sector (PRS) at 4.76%.
Data centres and prime regional co-living both yield 5%.
However, for investors comfortable with risk, high-yield assets provide
substantial income to offset debt costs and fund property enhancements.
Shopping centres top the list with an average yield of 9.13%, despite a
0.44% annual decline.
Local and neighbourhood shopping centres yield 10%, with sub-regional
centres at 9% and regional centres at 7.5%.
The leisure sector averages 8.5%, with good secondary leisure parks at 9%
and prime leisure parks at 8%.
High Street Retail yields 7.83%, but good secondary retail reaches 10%. The
broader HMO sector in England and Wales delivers a robust 9.7%.
Excellion Capital highlights that the student accommodation sector’s
resilience, coupled with its ability to attract
cost-effective loans
, positions it as a beacon for those prioritising long-term value over
high-risk, high-reward ventures such as shopping centres or leisure parks.
Student population growth fuels success
The managing director of Accommodation for Students, Simon Thompson, said:
“It does appear that student accommodation is the bedrock of safe property
investment right now – though there will be student landlords wondering
about the justification.
“Apparently, its low yields are a testament to unshakable demand and
enduring value.”
He added: “The growth in student populations continues to drive rental
income.
“It appears that since banks favour these assets, student landlords are
well-placed to secure competitive financing and build portfolios that
withstand market fluctuations.”
