24,800 new student beds enter UK market as Covid-19 fails to silence 'the call of the campus'

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New research from Cushman & Wakefield reveals the purpose-built student accommodation (PBSA) market has been remarkably resilient over the last year despite the shadow of Covid-19, as the number of new beds increases and the development pipeline remains strong.

Student accommodation providers across the sector have wrestled with the challenges of campus closures and adaptation and, throughout this whole period, supporting those who couldn’t go home or have chosen to return to campus. The impact of Covid-19 on demand meant that 2020/21 saw the greatest amount of rental discounting in the history of the sector with 25 per cent of all direct let schemes offering some form of a reduction.
 
The healthy dose of new student beds entering the market for the 2020/21 academic year (+24,800) represents a net increase of 21,000 beds. Some 3,800 beds have left the market, improving the overall quality of stock. Quality accommodation continues to be on students’ minds, demonstrated in the price of a new university en-suite bed increasing by 17 per cent annually compared to 2019/20, although this again raises questions about overall affordability.
 
More than half (58 per cent) of beds are now en-suite, and the number of rooms let by operators directly to students has increased in size by 119 per cent over the last seven years. The private sector has again delivered the majority of the new beds this year (85 per cent) and the private sector now owns 51.4 per cent of beds in the UK. Average private sector rents (excluding London) stood at GBP7,040 per annum, versus GBP6,409 in university-owned accommodation (excluding London). Beds wholly owned by universities, by contrast, have grown by just 4 per cent, indicating increased appetite for universities to work with accommodation providers in long- and short-term partnerships.
 
The national development pipeline currently stands at 115,000 beds and approximately 58 per cent of these have planning permission. Birmingham has the largest regional pipeline at 6,700 beds.
 
Sarah Jones, Partner in Higher Education Public Sector Advisory at Cushman & Wakefield, says: “Our clients have been faced with unprecedented uncertainties during the last year over the Covid-19 pandemic, but student accommodation operators have risen brilliantly to these new challenges. This has included providing additional support to help ensure the well-being and health of students is protected in these difficult times. Students have made it clear that they are intent on continuing their university journeys and going away to study still has an incredible value in providing important life experiences.
 
“Although some new beds have been delayed, the continued delivery and positive commercial outlook despite the pandemic confirms the engine for growth is still powering this market forward. Whilst universities may see this recent period of blended learning for many students as an opportunity to consider more flexible ways of learning into the future, the campus is set to be an important focus for learning as ever for students.”
 
The future is bright for PBSA as the UK’s position as an academic powerhouse is set to outlive any pandemic uncertainties. There has been an 8.5 per cent increase in overall applications for the January 2021 UCAS deadline, with the rise in applications greater than that seen during the Global Financial Crisis. A recent demographic dip in the number of 18-year-olds in the UK is now set to reverse, as UCAS predicts there will be 90,000 additional 18-year-old domestic applicants by 2025. However, non-EU students are currently driving the growth in applications with a 14.7 per cent uplift in application levels in a single year. Between 2014/15 and 2019/20 there has been a 53 per cent increase in full-time student numbers at the top five fastest growing universities.
 
In terms of regional breakdown of where new beds were delivered, Coventry led the way with over 3,700 new beds being delivered (16 per cent of the total market). This is followed by London, Leeds and then Exeter. Average rents range from GBP124 per week in Sheffield, up to GBP174 per week in Bristol, with London coming in at most expensive at GBP238 per week.
 
David Feeney, UK Student Accommodation Advisory Lead at Cushman & Wakefield, says: “Student numbers show no sign of slowing down with HESA data showing just over two million full-time students studying in the UK at the current time. Students studying at post-graduate level have been a key driver of this growth, with this cohort increasing at an average of 5.1 per cent per annum since 2016/17. Although it might be expected that the Covid-19 pandemic would deter international applications, the UK’s global reputation for academic excellence is helping to shore up the number of applications from non-EU undergraduate students. UCAS data again showed an increase in the number of accepted applicants from non-EU undergraduate students for the 2020/21 academic year.”