En suite, 'hospitality teams', gleaming show suites - Harriet Swain charts the rise in demand for upmarket digs

This month, a new kind of shop opened in central London. It caters exclusively for students - but it doesn't sell books or even baked beans. Instead, it is a storefront for the Unite Group, the UK's largest private-sector student accommodation provider, and it is intended to be a "one-stop destination for all London students looking for a place to live".

It offers students a glimpse of full-sized show suites of typical rooms and a chance to talk to "hospitality teams". It sells the lifestyle that Unite currently provides to some 31,000 students across the country. If the London venture is a success, the same lifestyle will be sold in similar shops throughout the UK.

Tabitha Birchall, director of public affairs for Unite, says the initiative reflects the fact that service has become essential in the student accommodation market. "We call ourselves a student hospitality company," she says. "It is more about giving that warm welcome you get from a hotel rather than being a landlord."

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Unite's standard rooms cost between ?55 and ?130 a week depending on location. Its packages offer insurance for students'

possessions, social events, a 24-hour site presence in the form of hospitality managers and welcome packs. En suite bathrooms are taken as read. Rooms and fittings are standard. The bed in the showroom in London is the same as that a student will find in a real room in Manchester.

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The idea of treating students as hotel guests is not unique to Unite. A new hall of residence recently opened in Manchester by the property firm Opal offers a spa, steam room, Jacuzzi and heated pool.

The most expensive student block, the IES Student Residence Hall on the King's Road in London, has unlimited web access, night security staff and CCTV. The price of a standard single next year? From ?217 a week.

Large, well-appointed private developments such as these, aimed exclusively at students, have become a huge growth area. While few would hanker after the days of queuing for a leaky toilet, is this hotel lifestyle really what students want?

Yes, Birchall says. Unite's premium rooms are the first to go. She says the idea of insurance and of an on-site person keeping an eye on their offspring is attractive to parents, whose wishes are an increasingly important influence on student life.

Often, the key question for students is not whether they can afford it but whether they are paying for it, says Martin Blakey, chief executive of Unipol, a charitable company that helps students find accommodation in Leeds and Bradford. Many first-year students don't know what their rent is because it is all handled by their parents.

But it is not only parents who are driving the trend for better-appointed student accommodation. Students increasingly appreciate the easier life it offers, according to William Berry, director of AccommodationforStudents.com, a search engine that puts students and landlords in touch with each other. He says that while first-years naturally gravitate to the safety and comfort of new private developments, second and third-years, who traditionally prefer the freedom of their own pad, are now choosing them too.

"It's hassle free," he says. "They aren't going to have a run-in with their landlord. You usually get a self-contained space for yourself. If you want to concentrate, you can do that without getting distracted."

But the factor that really drives up specs is competition. First, universities are experiencing increased competition for students and they need to sell their accommodation as well as their courses. Second, private companies that came into the accommodation market early face increasing competition from new rivals.

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"Thinking about what students want is also about increasing value for money for students, so that they choose us over someone else," Birchall says.

This corner of the property market has caught the eye of large developers and investors, who have noted the opportunities offered by rapid growth in student numbers as the stock of university-owned property is deteriorating with age.

Student properties are now traded as an investment, not only in this country but overseas. The Government of Singapore Investment Corporation has entered into a ?350 million joint venture with Unite involving student accommodation in London, Edinburgh, Cardiff and Dublin. A New York-based hotel company has been involved in a recent development for the London School of Economics. And Real Estate Investment Trusts, due to be launched in the UK later this year, will make institutional investment in residential property more tax efficient and thus increase the incentive to put money into this growth sector.

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The key attraction of the student market for developers, says Philip Hillman, a partner at property consultants King Sturge, is that demand is relatively constant. This means fierce competition for student blocks that come on the market: Birmingham University has just sold three for "an extraordinarily good price". Hillman has been involved in the sale to the Brandeaux property group of 4,000 student bedrooms in cities across the UK worth ?190 million.

Some private investors are developing new building complexes themselves.

Others are taking over existing stock. Servite Houses, a housing association, has just signed a multimillion-pound deal with Middlesex University to take over all of its 1,916 student homes, buying two halls of residence, arranging a long lease on a further three and taking over management of the rest.

Blakey says one effect of these student blocks has been de-studentification. Parts of cities once dominated by students have become the preserve of professional couples instead. This trend has been encouraged by the 2004 Housing Act, which makes it compulsory for private landlords offering houses for multiple occupancy to obtain a licence and for them to make the improvements necessary to earn them.

So in theory, everyone is happy:students get plush accommodation, developers invest and residents get their streets back.

. But it isn't that straightforward. While analysts are confident that the market will continue to grow, there is now oversupply in some areas, such as Liverpool, Manchester, Nottingham and Leeds. Blakey says that about 4,000 rooms in the market are empty in Leeds out of a total of 40,000. This could be a particular problem next year with student numbers expected to drop slightly when top-up fees kick in.

Then, even where there is oversupply, it hasn't brought down rents. The latest accommodation costs survey by the National Union of Students found that the average weekly rent for a room in university-owned or managed accommodation and private halls in 2003-04 was ?66.46, an increase on the previous year of 11.2 per cent. And while wealthy parents pay the bills in some areas, in others they don't. In Leeds, 80 per cent of first-years have their rent paid by parents; in Bradford, the figure is only 26 per cent.

The NUS, which has organised campaigns against accommodation being privatised in some institutions, is now working on a survey with Unipol, to be released in the autumn, of how new developments are affecting affordability.

The concern is that at some institutions all the accommodation will be at the top end of the market. As pre-92 institutions tend to have larger property portfolios of their own, most new accommodation building is at or around new universities, which tend to attract more students from non-traditional backgrounds. Blakey is worried that this could mean the poorest students paying most for accommodation, which could have a knock-on effect on diversity. Moreover, students who sign an accommodation contract in the private sector are usually locked in for a year. "Some of the universities that use the private sector the most have the highest drop-out rates," he says.

Blakey's other worry is that many of the new self-catering blocks are less social than traditional student accommodation and that this, combined with a more diverse student body, can lead to an increase in behavioural problems and unhappiness. "I think there are some very lonely people in some of the bigger en suite developments," he says.

Many developers are aware of these concerns - hence the organised social events and communal areas. They also acknowledge the rents issue. Chris Baines, head of commercial services at Servite Houses, says it is likely that developers will start building more traditional halls with more options for students to share, keeping the plusher pads for wealthier postgraduates and others who can afford it.

Birchall also predicts greater polarisation in demand for and supply of different types of accommodation, with some students wanting luxury and others wanting no frills.

Veronica King, the NUS's vice-president, welfare, says that if you ask students before they go to university what they want from their accommodation they talk about en suite bathrooms and proximity to the city centre. Ask them a couple of years down the line and, instead, they just want to live with friends and to be near a bus stop, she says.

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"They realise swiftly that things such as en suite bathrooms aren't that important."