The Cushman and Wakefield 2022 UK accommodation report has been released,
highlighting some of the interesting trends within the accommodation
sector. As this sector is beginning to recover from the impacts of
COVID_19, it now faces rising inflation and increasing rental prices. In
this blog, we will discuss some of the highlights from the Cushman and
Wakefield report.
Student Demand
The levels of student demand are now higher than ever, with a record of
2,175,835 full time students at university in the UK. Compared with 5 years
ago, there has been a 221,990 increase in the number of students living
away from home, meaning that 1.63 million students require accommodation
for the duration of their course. Overall, there has been a 8.0% increase
in student numbers.
In terms of student demographics, there has been a sharp increase in the
number of post graduate students; despite only representing 22% of the
student population, postgraduates represent 40% of growth. Highlights from
the report show that 24 UK universities increased by over 5,000 or more in
student numbers over the last 5 years.
For international student demand, the number of visa sponsors between 2019
and 2020 was down 22%, likely as a result of the COVID_19 pandemic.
However, between 2020 and 2021, the number of visas being issued increased
by 81%, likely due to the lifting of restrictions and a return to
normality. Across 2022, there has been an increase in the number of UCAS
applications for undergraduate students, with Russell group universities
seeing their applications increase by over 23% across the last 5 years.
Investment
Across the past 5 years, across all disciplines, over £5 billion has been
invested into higher education and academic facilities. Investment and
capital expenditure are forecast to grow, with a number of higher education
institutions planning investment of £500 million. The 24 Russell group
institutions make up 60% of the total spending and are set to invest in the
creation of world class facilities to attract the best students.
Accommodation
Supply
In the 2021 / 2022 academic year, due to the uncertainty caused by the
pandemic, and the ongoing possibility of blended learning, only 24,612 new
beds were delivered to students, a mere 667 increase from the previous year
and 25% lower than the 5-year pre-pandemic average. In 2020, there was a
record of 9,992 rooms unavailable, with almost two thirds of these having
shared bathrooms meaning they could not be offered to students due to
COVID_19 restrictions – the remaining rooms were undergoing refurbishment
or conversion.
Across the private sector, there is substantial growth. There has been an
increase both in the number of rooms available to students, and in the
quality of rooms being offered, 22,998 rooms (93%) were rated as high
quality by students. The city which saw the largest delivery of new beds
was Liverpool, with over 2,279 new beds available to students.
Growth and decline
In the 2021 / 2022 academic year, there was a decline both in the number of
beds and in the number of new schemes; the number of new developments was
less than half those in 2017. The slowest growth was found in those beds
aimed at international students, given the uncertainty surrounding
COVID_19. Beds aimed at international students are often of the highest
quality, yet despite this market seeing a 4.5% growth over the past 7
years, this market saw an increase of just 0.1%. Moreover, given this
uncertainty, rental increases were restrained in many locations, meaning
that rent prices increased just 1.07% on average, compared with 2.83%
across the previous 7 years.
Pricing
Across the student sector, rent prices are beginning to rise, with the
average annual rent in the private sector, outside of London, 7,055.71.
This is 74% of the maximum student loan. For university owned
accommodation, this figure is £6,482.45, 68% of the maximum student loan.
These rent prices are rising much faster than inflation. Rents have risen
19.3% and 14.5% since 2016 / 2017 for private sector accommodation and
university accommodation respectively. Both these figures are above the
rate of inflation which was 11.1% for the same period. What’s more, is that
student loans are only set to increase 2.3% for the 2022 / 2023 academic
year, despite private sector accommodation in 2021 / 2022 being priced 21%
above the national average. It is likely that for students, issues
surrounding affordability of accommodation are likely to become more
prevalent, especially considering that RPI inflation is at 11.1%. However,
although prices are rising for students, the quality of accommodation is
also improving, resulting in those students who are less price sensitive,
opting for high quality accommodation.
Aside from private sector accommodation, HMOs are more affordable for
students, with HMO’s priced 20% lower than PBSA private sector beds.
However, within the HMO sector, students will have to consider the prices
of utilities, which are constantly rising.
Importance of social and amenity spaces
In a society which focuses on the well being of students, it is no surprise
that social and amenity spaces are an important consideration for students
when choosing their accommodation. However, only 64% of accommodation in
2021 / 2022 was rated by Cushman & Wakefield as having high quality
social and amenity spaces. Despite being impacted by several sub-100-bed
schemes, this was substantially lower than 2020 / 2021, where this figure
was 79%. It is clear that those providers which focus on offering high
quality social and amenity spaces will be in a greater position for success
than those who do not.
Supply
The national student bed ratio has increased, now at 2.39 students to 1
bed. This has increased from 2019 / 2020 where the ratio was 2.19: 1.
Moreover, the university-only student to bed ratio is at 3:1, thus meaning
that many students will have to rely on the private sector to provide them
with accommodation; this is most prominent within London and for students
in city locations.
Across the rental market, there is a clear distinction between the average
rents for the same quality accommodation in ‘low’ ‘medium’ and ‘high’
rental markets. Across cities such as Cardiff, Liverpool, Newcastle and
Sheffield, the average rent is currently £143.71 per week. This is 16%
lower than for location such as Birmingham, Nottingham, Leeds or
Southampton, or other mid-priced accommodation where the average rent is
£166.13 per week. By comparison, this is 18.5% lower than high priced
locations such as Bristol, Bath or Manchester where the average rent price
is £203.72 per week.
Development pipeline
Despite slow growth in the number of new developments this year, looking
ahead to 2022 / 2023 the new development for PBSA is substantial, with over
102,000 beds in the pipeline. In the last 12 months, 24,000 beds have
entered the pipeline, with London and Nottingham as the largest two
locations for new beds.
Future investment
It is predicted that year end volumes for 2022 will be the highest on
record, and the sector is likely to continue increasing in market share,
especially in comparison to other sub-sectors in the property market.
If you’d like to read the report in detail, follow the link for more
information:
Click to access Cushman__Wakefield_Student_Accommodation_Report_2022.pdf
