The purpose built student property sector in the UK is resilient despite uncertainty with the number of space due to be ready for the 2019/2020 academic year up by 25%, new research shows.
This year on year increase in the development pipeline across more than 60 university towns and cities highlights the resilience of the sector, despite wider uncertainties, according to the analysis from real estate firm Knight Frank.
In total, the increase will lift the overall number of purpose built student bed spaces by 5.1% to over 600,000. A further 14,000 bedrooms are under construction or in planning and due to be delivered in during the 2020 and 2021 academic years, although this total may rise as new applications are approved.
The majority of PBSA rooms are operated by universities, accounting for 64% of the current stock. Of this, however, 38% is actually privately owned and leased back to universities, the research also shows.
As universities seek to improve or replace older stock, there could be opportunities for further collaboration and investment into the sector from private developers, the report points out
It also points out that the private sector is playing a growing role in providing new accommodation for students. In total, private developers will build 82% of the total beds due to be completed by 2021, and nearly 90% of the beds due to be built for the 2019/2020 academic year.
The type of stock in the pipeline is also changing. An analysis of schemes under construction indicates a shift away from studios towards en-suite rooms arranged in cluster flats, which traditionally command lower rents.
Some 68% of the units under construction are categorised as cluster flats with shared kitchens and lounge areas. The remaining 32% are studios. This represents a shift in development trends, as the market reacts to perceived affordability pressures in some key cities, and changing student demands.
A recent survey of 70,000 students undertaken by Knight Frank and UCAS showed conclusively that value for money is the key driver in the accommodation choices of students. The survey also highlighted the importance of location, quality and the option to live in friendship groups as underpinning student happiness in private PBSA.
The development trend towards affordability is expected to continue, though rising development costs are likely to place upward pressure on pricing. However, the report adds that well located assets in strong markets will prosper and demonstrate high occupancy and rental growth across different accommodation types.
‘With a significantly larger pipeline this year, confidence in UK PBSA remains undiminished. Affordability will remain a key focus for owners, operators and students and our analysis shows a shift in development towards shared accommodation in response. Schemes that provide clear and obvious elements that add value will attract the strongest demand,’ said James Pullan, head of student property at Knight Frank.
