A studio lets for a third more and takes a third more space. The mix is decided by yield on cost, and the margin is a couple of pounds a week.
Compare them per square metre of building, not per bed. On an illustrative scheme, a studio at £245 a week earns 35.0 per cent more net operating income than a cluster en-suite at £185, but it takes 33.3 per cent more floor area and costs 33.3 per cent more to build, so the yields on cost are almost level: 6.78 per cent for the studio against 6.69 for the cluster bed. The studio's lead is £2.24 a week of rent, or about one point of occupancy, so the answer depends on the premium the local market will actually pay.
Worked in full in Student Housing Real Estate by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
Every student housing pitch book quotes rent per bed per week, and on that measure studios always win: they let for a third more. Investors who think in value per bed see the same thing. But a studio is a bigger unit with its own kitchenette, so a building of a given size holds fewer of them, and the land, the frame and the fit-out are all paid by the square metre. The comparison that decides the mix is income per square metre against cost per square metre, which is the same as comparing yields on cost.
| Input | Cluster en-suite | Studio |
|---|---|---|
| Rent a week | 185 | 245 |
| Weeks let | 51 | 51 |
| Occupancy | 98% | 95% |
| Operating cost a bed a year | 2,900 | 3,300 |
| Gross internal area a bed, m² | 24 | 32 |
Both bed types use the same all-in cost per square metre: build at £3,000, plus 15 per cent of fees and contingency, plus £500 of land per square metre of building, £3,950 in all. Both are valued at the same 5.50 per cent yield. Studios are let at slightly lower occupancy because their tenants are more price-sensitive. They cost more to run per bed, because each carries its own kitchenette, utilities and turnaround, but less per square metre, because a studio has no shared kitchen or communal space to clean and staff.
Revenue a bed = rent × weeks × occupancy
NOI a bed = revenue − operating cost
Cost a bed = GIA a bed × all-in cost per m²
Yield on cost = NOI ÷ cost; profit on cost = yield on cost ÷ exit yield − 1
In Excel: =(Rent*Weeks*Occ-Opex)/(GIA*Cost_m2) for each bed type.
Cluster: 185 × 51 × 98% = £9,246 of revenue, less £2,900, is £6,346 of NOI on £94,800 of cost: 6.69 per cent. Studio: 245 × 51 × 95% = £11,870, less £3,300, is £8,570 on £126,400: 6.78 per cent.
| Line | Cluster | Studio | Studio premium |
|---|---|---|---|
| Revenue | 9,246 | 11,870 | 28.4% |
| NOI | 6,346 | 8,570 | 35.0% |
| NOI margin | 68.6% | 72.2% | |
| Cost | 94,800 | 126,400 | 33.3% |
| NOI per m² | 264.4 | 267.8 | |
| Value at 5.50% | 115,387 | 155,823 | |
| Yield on cost | 6.69% | 6.78% | 9 bp |
| Profit on cost | 21.7% | 23.3% |
The studio is ahead by 9 basis points of yield on cost, and the reason is not the rent. Per square metre the studio actually earns less revenue, £370.9 against £385.3, because its rent per square metre is a touch lower and its occupancy is lower. It wins on cost: operating cost rises only 13.8 per cent for a third more space. On a 10,000 m² building the all-studio scheme holds about 312 beds and the all-cluster scheme about 417; both cost £39,500,000, and the studio scheme earns £33,911 more NOI a year, £616,572 more value at 5.50 per cent. That is 1.6 points of profit on cost, not the £40,435 a bed the per-bed values suggest.
The break-even studio rent, at which both yields on cost are equal, is £242.76 a week, a premium of 31.2 per cent over the cluster rent. At the same rent, the break-even studio occupancy is 94.1 per cent. Lose £2.24 a week, or one point of occupancy, and the cluster scheme is the better building.
| Studio rent a week | 92% occupied | 95% occupied | 98% occupied |
|---|---|---|---|
| £225 | 5.74 | 6.01 | 6.29 |
| £235 | 6.11 | 6.40 | 6.68 |
| £245 | 6.48 | 6.78 | 7.08 |
| £255 | 6.85 | 7.16 | 7.47 |
The grid is steep. Each £10 a week on the studio rent moves its yield on cost by about 38 basis points, and each three points of occupancy by about 30. In a city where studios let at a 27 per cent premium, £235 here, they fall just short of the cluster bed even at 98 per cent occupancy; at a 38 per cent premium, £255, they win comfortably even at 92 per cent. The mix is a local pricing question, and the place to settle it is the rent survey, not the architect's brief.
The same test applies when an existing scheme re-mixes at refurbishment: the cost is the conversion and the lost cluster beds, the income is the studio premium net of its occupancy. The companion files price a cluster-to-studio re-mix of that kind on the book's own building.
Comparing rent per bed, or worse, comparing contracts of different lengths. A 51-week studio at £245 against a 44-week cluster room at £185 makes the studio's annual rent look 1.54 times the cluster's, £12,495 against £8,140, before a single square metre or a void is counted. Put both on the same weeks and the same occupancy basis first, as in the 44-week against 51-week comparison, and then divide by area. Weekly rent per square metre is the quickest screen: £7.71 for the cluster bed against £7.66 for the studio here, which is why the two end up so close. The build side of the same question is in what student accommodation costs to build per bed.
The book's 520-bed scheme carries six room types on one rent roll, and the free workbook for this case lets you change the mix and read the value.
Only where the local studio premium exceeds the extra space it takes. In the illustration a studio takes 33.3 per cent more floor area, and at a 32.4 per cent rent premium and lower occupancy it yields 6.78 per cent on cost against 6.69 per cent. Below a £242.76 rent, a 31.2 per cent premium, the cluster bed is better.
Including its share of corridors, cores and plant, an illustrative studio takes 32 m2 of gross internal area against 24 m2 for a cluster en-suite with its share of the shared kitchen, a third more. At an all-in £3,950 per m2 that is £126,400 a bed against £94,800.
Solve for the occupancy that equalises yield on cost. In the illustration, at £245 a week over 51 weeks with £3,300 of operating cost, the studio matches the cluster bed's 6.69 per cent at 94.1 per cent occupancy, about one point below its assumed 95 per cent.
This article is one calculation from Student Housing Real Estate. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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