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How UK Universities are Driving Tenant Demand

The education sector and its impact on the wider market has always been a signpost for investors seeking concentrated demand. The fact is, UK universities drive tenant demand. This is why UK cities with strong educational cores, such as Oxford, Cambridge and Edinburgh, are always on the radar for investors. 

Not only do students make up a large proportion of the rental market but a talented graduate pool goes hand-in-hand with a strong commercial landscape. Graduates of quality universities will often want to stay in the area, especially if there are global businesses nearby where they can start their careers.

Obviously, these graduates go on to be the young professionals that want to live in the rental market. For investors, top university towns and cities represent an opportunity to tap into both graduates and the professional rental market that wants to be close to work.

With this in mind, we’ve identified the top UK cities and universities in terms of retention rate and compared this to overall demand. With data we’ve sourced from the industry, these are the top locations around the country that are attracting graduate demand and maintaining a strong retention rate.

Best UK Cities for Salary/Rent Value Index

City Average Rent (£) Monthly Salary Salary/Rent Index (SRI)
Birmingham 871 1,771 2.03
Slough 1,094 2,094 1.91
Reading 1,094 1,935 1.85
Leeds 932 1,715 1.84
Bracknell 1,088 2,000 1.83
Newcastle 1,003 1,723 1.71
Manchester 1,021 1,771 1.71
Cambridge 1,225 1,972 1.60
Bristol 1,152 1,781 1.54
Brighton 1,152 1,781 1.54

One of the top ways of measuring graduate demand is with the Salary/Rent Value Index (SRI). This takes into account the average monthly salary that graduates can expect and measures this against the average rent, building out the final SRI.

When this is taken into account against our list of the 20 top UK cities for graduate retention, average earnings, tech innovation and new startups, the results are interesting. The top 3 UK cities for SRI are Birmingham (2.03), Slough (1.91) and Reading (1.85), closely followed by Leeds, Bracknell and Newcastle-upon-Tyne respectively. 

This shows just how much demand these areas are building for graduates, providing a mix of quality career opportunities and affordability that can’t be found elsewhere. Slough particularly stands out due to the excellent average salary it can provide for graduates. Out of the cities on the list, Slough offers the best salary and it’s rental prices are relatively affordable when compared to other Southern destinations, putting it ahead for working professionals starting their career.

It’s these over-performing SRI ratios that also makes Birmingham and Reading’s surrounding areas more desirable for investors. It’s common for rent values, salaries and the graduates themselves to ‘ripple’ out from city-centres. Graduates and young professionals often seek more affordable areas to live within commuting distance of cities, meaning more competition in the housing market for surrounding areas and thus, higher rental values. If these surrounding areas are also pushing regeneration, investors can harness the demand for quality amenities that often follows suit. 

Cities and Graduate Retention

In terms of employed graduates, the South East has the highest number outside of London at 33,490, which makes up 13.5% of the 248,165 graduates within the country. Aside from having some of the best educational centres in the country, the South East is also home to a thriving commercial landscape and an impressive technology corridor dubbed the ‘UK’s Silicon Valley’.

With most of the UK technology sector located in this corridor, it’s highly attractive for graduates that want to start their careers at top names such as Oracle, Microsoft and Dell. With the region forecasting good economic performance and maintaining a good standard of living, it’s no surprise that the South East has such an excellent graduate retention rate.

So what does this mean for investors? It’s expected that demand for the South East will only continue to grow, resulting in UK-leading property price rises. Similarly, the population in this area is forecast to skyrocket. For example, experts predict a 15% rise in the population of Bracknell by 2039, one of the highest in the country. This growth can typically be attributed to the attraction Bracknell holds with both graduates and professionals. 

As you’d expect, an investment in one of these prime towns would be well placed to take advantage of rising demand to deliver consistent returns. It’s no coincidence that several of the emerging markets we’ve identified are located at the heart of the Thames Valley, ready for investors that want to take advantage of increased demand and new development in the region.

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