A record number of new student accommodation bed spaces (30,000) have been delivered in 2017, taking the total number of purpose-built spaces available to 602,000.
Cushman & Wakefield’s UK Student Accommodation Report 2017/18 looks at the student accommodation market across the UK, including demand and supply of new developments. While the numbers of newly delivered en-suite and studio spaces have both increased significantly, the supply of studio rooms has increased by 106% since 2014.
Overall rents per bed space in student accommodation increased 2.9% between academic years 2016/17 and 2017/18, marginally above the 2.7% seen during the same period in the previous year, indicating the sustained health of the student accommodation market as a whole. However, there were significant variations across the UK as well as by type and sector.
Manchester
Manchester, which is home to 23,578 purpose-built student accommodation bed spaces, has the UK’s second largest student market and has seen a 20% increase in students from outside the UK over the last five years.
Limited purpose-built student accommodation development and competition in the city means that headline rental growth has been ahead of the national average, with en-suite prices up by 3% and studio rents up by 5% on the previous year. The universities rely on the private sector to absorb demand that they cannot provide for, with nearly 4,000 private sector beds in nomination agreements with the two universities.
Despite the development of Birley Fields and the ongoing redevelopment of Owens Park, the lack of recent development means that overall accommodation quality in the city has slipped behind that of other major UK cities. Forthcoming developments such as Unite’s 30 storey 573 bed space development at New Wakefield Street and Empiric Student Property’s redevelopment of Victoria Point will help to fill the gaps in quality that have emerged since 2012.
Liverpool
Liverpool is now home to 17,080 purpose-built student accommodation bed spaces for the 2017/18 academic year. 1,844 of these beds are new for the current academic year, with nearly two thirds of these en-suite. At £135 per week, the average price of a new en-suite bed space in Liverpool is almost 10% lower than the average new bed space price nationwide. This relative value has been successful in drawing students out of inexpensive and often poor quality private housing and quality products have been particularly successful in attracting non-UK students, the number of which have grown by 97% over the last five years at the University of Liverpool alone.
Over the last three years, over 5,800 bed spaces have been brought to the market in Liverpool, increasing total supply by 50%. Increased competition means that rental increases have slowed to 1% and 2% for en-suite beds and studios respectively.
New developments in 2017/18 include the 776 bed space St Luke’s View operated by UNITE, featuring three quarter and double beds, and extensive social spaces to enhance the student experience. Rents range from £138 to £186 per week. The University of Liverpool has opened 489 bed spaces in its new Greenbank Student Village. The Village benefits from social areas, music rooms and extensive grounds. Prices range from £166 to £206 per week.
David Feeney, Advisory Associate at Cushman & Wakefield, commented: “It is encouraging that the student accommodation market continues to flourish despite initial concerns following the EU Referendum and the impact of increased student tuition fees. However, in a number of cases studio development has been driven by higher prices rather than by true student demand, which now risks oversupply. En-suites and shared rooms provide a cheaper bed and more of a social experience, with communal and shared spaces.
“There is a real opportunity for developers to meet the demands for more affordable accommodation and provide more standard or en-suite rooms for students. Studios are 45% more expensive but do they offer a 45% better experience? It is all about the value of the experience and this will increasingly drive students’ preferences for accommodation.
Student numbers vs. Fees & Brexit
More students than ever (1.04m) are studying away from home meaning the demand pool for accommodation continues to grow. Full-time student numbers are now 4% higher than in 2012/13, when maximum tuition fees rose to £9,000 per year, and continue to drive growth in the sector. Higher-tariff universities grew enrolments by 1%, with medium-tariff institutions growing by 2%, proving that despite some concern about the impact of the Brexit vote on student numbers, there remains considerable demand for new accommodation.
In terms of the investment market, final recorded transaction volumes in 2016 of £4.1bn were the second highest total on record but well below the 2015 total of £5.7bn. Transactions in 2017 to-date are ahead of this time last year at £3.61bn (£3.25bn in 2016) but unlike 2016 there is a further £1.05bn under offer and £1.5bn in the market, double the totals for last year.
David Feeney continued: “The UK is still a global education hub, attracting the best students from around the world. Even with Britain’s exit from the EU progressing, the relatively weak Pound has attracted additional applications from non-EU students, with their numbers rising 5% over the last year. It is a key market, as 23% of the UK student population is now from overseas.
“In funding terms, foreign students have a much greater impact on the income profile of UK universities, making up 26% of all tuition fee income. It is clear that the UK remains a highly attractive place for students to study and this continues to be reflected in the growing student accommodation market. The sector will continue to prove attractive to investors and if developers are able to meet student demand for en-suite rooms, rising student numbers will provide suitable and reliable returns.”
