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.
In Manchester, which has the largest student population outside of London, annual studio rents increased by 5% despite the number of studio beds rising 61% thanks to tight restrictions on development. In Glasgow, however, the number of studio beds increased 29%, while annual rents decreased by 2%. En-suite rents have increased by the most in Birmingham and Bristol (4%), followed by Edinburgh, Manchester and Nottingham (3%). En-suite rents are highest in London, at an average cost of €221.2 (£195) per week. In Manchester, they average €161.1 (£142) per week but the cheapest average weekly rent of the cities surveyed was in Sheffield - €136.1 (£120) per week.
The private sector continues to offer the most expensive accommodation in the market, with average annual rents per bed space (excluding London) in the private sector 21%- €1215.1 (£1071) per year - more expensive than university managed accommodation. Within the private sector, the annual difference between studios and en-suites (excluding London) is 45% - €2964.6 (£2613) per year.
The private sector dominates the supply of new developments, delivering 87% of all new beds so far in 2017/18. However, universities continue to provide the largest number of bed spaces, offering 57% of all rooms available in 2017/18. Overall en-suite bed spaces now represent 56% of the market, whilst studios account for 12% of all beds.
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 €10211 (£9000) 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 a considerable demand for new accommodation.
In terms of the investment market, final recorded transaction volumes in 2016 of €4.6bn (£4.1bn) were the second highest total on record but well below the 2015 total of €6.4bn (£5.7bn). Transactions in 2017 to-date are ahead of this time last year at €4.1bn (£3.61bn) (€3.69bn - £3.25bn in 2016) but unlike 2016 there is a further €1.19bn (£1.05bn) under offer and €1.7bn (£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.”