Positive outlook for the Student Accommodation Sector

AFS Team·25 November 2019·4 min read
Positive outlook for the Student Accommodation Sector
The student accommodation sector remains vibrant, with a positive long term outlook.

This is driven by continued strong demand for university places. This year 560,000 students applied for a place at a UK University. This was the first increase for three years according to UCAS. Evidence of the continuing appeal of university study is reflected in the fact that almost 40% of the population of 18 year olds applied this year. It was also interesting to note that, despite the ‘Brexit factor’ applicants from the EU actually increased (by 1%) and applicants from outside of the EU by a record 9% (over 60,000).

The attraction of Universities to younger people remains and it is very positive that the appeal is increasingly widespread. Students from disadvantaged backgrounds are 49% more likely to apply than ten years ago, according the Universities UK. In the immediate period following the close of clearing UCAS announced that just under 500,000 students had actually been accepted for a place to study at university this year. This is a small rise on previous years.

Continuing trend

The growth in the number of people studying at university seems set to continue. The current increase has been achieved despite a historical decline in the number of 18 year olds. 2019 is the year in which this trend will be reversed with a growth in this demographic of 23% over the next decade. This factor alone is forecast to result in the demand for 50,000 extra places by 2030. In addition, the continued growth in the numbers of 18-24 year olds applying combined with a reduction in University entrance criteria is likely to increase demand by a further 300,000 (HEPI).

The impact on student accommodation

While it is unlikely that this increase demand will be met in full, it does indicate a healthy future for student accommodation. Continued demand for a place at University will create further requirement for student accommodation. This can be seen in the growth that the value of the PBSA sector alone, which is estimated to be worth £53 billion by Knight Frank.

What does this mean for Landlords?

Within this there are two trends to be aware of. One is that growth in student numbers tends to be concentrated. According to a recent Cushman and Wakefield report, just 10 Universities accounted for 42% of Student numbers growth. At the same time five universities have seen a 25% fall in student numbers.

Institutions which have seen particularly large growth in student numbers over the last three years include, London Metropolitan University, Cardiff Metropolitan University, Kingston University and Plymouth University. At the other end of the scale Universities such as Roehampton, Aston and Demontfort have seen large drops.

The other trend is the growth in the number of beds supplied through purpose built accommodation. In 2018/19 there were over 600,000 beds spaces available from University and privately owned stock. Once again, this is a focused trend with 60% of new bed spaces created last year in just ten locations. This has resulted in a downward pressure on rentals outside of London, which is bringing PBSA rentals closer to that achieved by private housing.

Therefore the overall positive trends will have sharp regional differences which are impacted by the growth in local student numbers, the performance of the University and the supply of purpose built beds.

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