Class of ‘17 and beyond: the best is still to come for purpose built student accommodation
While the country has been fixated on the residential market, less well recognised is the rapid growth in purpose-built student accommodation fuelled by strong investment and a robust development pipeline. The fundamentals are compelling.
Government policy is attempting to offset the uncertainty created by the EU negotiations by addressing affordability issues in the residential sector, primarily aimed at supporting young and first-time buyers. And this has predictably been occupying the headlines. In the background, however, more and more, high-quality student accommodation assets have been developed. And quickly.
It stands to reason, in many respects. Education is one of the UK’s greatest exports and demand is expected to grow for places at our universities going forward, almost irrespective of the shape of our future relationship with the EU; students from the EU account for only 5.6% of all students in the UK. HESA data reported that first year, first-degree enrolments have been gradually increasing over the last three years, from both domestic and international students. So, while the question over whether the Prime Minister will bow to Cabinet pressure over the allocation of student places in future immigration quotas remains, it is unlikely to affect the demand for places materially in the medium term. In addition, if Government heeds to public pressure over tuition fees, another obstacle to student growth could be tempered further still.
Development in this sector has been equally strong. Knight Frank estimates that £8 billion has been invested in purpose-built student accommodation (PBSA) in the last two years alone, reflecting growing expectations of the standard of facilities and the opportunities that it represents for developers and investors.
Cushman & Wakefield estimate that the UK boasted 568,000 PBSA beds. This is compared with a full-time student population of more than 1.7 million and in rapidly growing university towns and cities such as Nottingham, Coventry, and Durham, demand remains especially high. Our own team completed £65 million of deals in these cities last week, underscoring developer demand for well-located opportunities in cities where students demand more and better accommodation.
At a time when uncertainty prevails, PBSA has already become a success story for the UK real estate sector. We look forward to expanding our support for developers by designing more innovative funding solutions which help to deliver better quality facilities that serve the needs of universities and their students now and into the future.