The student housing market in the UK is facing a dynamic shift in supply and demand, resulting in unprecedented rental growth and a new quality standard for accommodation.
The number of students seeking housing continues to rise, but the pace of new developments has slowed, making it challenging for students to find purpose-built accommodations.
Taking a look at the UK Student Accommodation report done by Cusham & Wakefield, this article explores the changing landscape of student housing, the factors contributing to these shifts, and their implications for both landlords and students.
Slowing Growth in New Developments
Despite the continued growth in the demand for student accommodation, the number of new developments is not keeping pace. The pace of new deliveries has decelerated, resulting in a decline in the number of students who can access purpose-built accommodations. This slowdown in supply, coupled with broader economic factors, has led to unparalleled levels of rental growth.
The rental growth has been particularly pronounced in premium developments and large cities where there is a limited supply of new beds.
The pricing of student housing across the UK is becoming more segmented, with some areas experiencing sharper increases in rental costs than others. As a result, students are increasingly facing affordability challenges, particularly in expensive markets.
While quality remains a priority for student accommodation providers, the increasing focus on amenity spaces and the overall student experience has been notable.
Accommodation schemes are continually evolving to meet the expectations of modern students. However, the rise in quality is accompanied by concerns about affordability, especially in the most expensive markets.
Despite structural undersupply, students are displaying a reluctance to pay any price for accommodation.
Even in the most constrained markets, there are unoccupied beds due to changing demand profiles and affordability issues. This phenomenon highlights the evolving priorities of students, who are now more selective about the accommodation they choose.
For the 2023/24 academic year, there are 718,805 purpose-built student accommodation (PBSA) beds available, representing an increase of just 8,760 from the previous year.
This marks a continuation of the recent decline in new bed deliveries. While the net increase in beds for 2023/24 is higher than the previous year, the number of new beds being delivered has decreased, with the market experiencing fewer closures.
Issues related to build costs and financing are hampering the delivery of new beds, and only a limited number of markets, mainly outside London, can support the blended rents necessary for viability.
Developers and operators are delivering beds at a rate below historical averages, with only 1-2 new beds introduced each year.
The development pipeline nationally comprises 131,211 beds, with over 74,000 of them approved.
However, in the current environment, it is unlikely that this entire number will be delivered to the market, leading to ongoing constraints on new development and rents above market averages.
The end of the pipeline, which extends to the 2024/25 academic year, is expected to see 22,200 beds added, including those reopening for refurbishment.
On another positive note, the occupancy landscape is evolving, with markets that previously faced challenges in filling schemes, such as Newcastle, Cardiff, and Lancaster, now experiencing improved occupancy rates.
Edinburgh, Newcastle, and Sheffield are also witnessing strong Clearing performance, indicating increased interest from students.
On the other hand, some traditionally strong markets, such as Exeter and Nottingham, are underperforming, with lower occupancy rates and pre- and post-clearing discounts.
The student housing market in the UK is undergoing a transformation in response to changes in supply and demand dynamics. Students are becoming more discerning about their accommodation choices, and landlords and developers need to adapt to meet these evolving needs.
If you are interested in promoting your properties to students, www.accommodationforstudents.com is the UK’s leading student accommodation website.
