The UK student accommodation market continued to flourish in 2018, with 31,348 new beds delivered for the 2018/19 academic year, according to new research from Cushman & Wakefield. This has taken the total number of purpose-built spaces available to a record 627,115 and a further 36,000 new rooms are expected to enter the market in 2019. New data reveals the private sector has grown 130% in four years and now controls over half of all supply in the market if considering on-campus partnership bed spaces as ‘private sector’ beds. This is a significant change from 2014 when universities provided two-thirds of all beds in the UK. New supply has also been dominated by private sector development with 77% of all beds delivered by this part of the market in 2018. On a weekly and annual basis, private sector accommodation is more expensive than that available through universities, with the differential on an annual basis rising to 21.6% (2017: 21%). Both room and amenity quality is significantly higher in the private sector.
The significant differentials between en-suite products provided by the private sector and by universities may now be a thing of the past. The average price for private weekly en-suite student accommodation in the regions is €146.11 (£132.34), in London it is €246.20 (£223). Private sector en-suite rooms in Edinburgh typically cost €168.92 (£153) per week, €161.19 (£146) per week in Birmingham and €175.54 (£159) per week in Bristol. Interestingly, at an average of €155.90 (£141.21) per week, university en-suites are now more expensive on a weekly basis than in the private sector, although cheaper on an annual basis due to shorter lease lengths.
Overall rents per bed space in student accommodation increased 2.8% between academic years 2017/18 and 2018/19, largely in line with the 2.7% observed in the previous year – indicating continued health across the market. However, the quality of amenity spaces, such as common areas, is more important than ever to the success of schemes with those offering high-quality amenity spaces experiencing a 3% annual increase in rents, compared with poorer quality spaces only managing to attract a 2.5% increase.
David Feeney, UK Student Accommodation Advisory at Cushman & Wakefield, commented: “The student accommodation market shows no sign of decelerating with another record-breaking year of student bed-space provision in 2018. Even with the uncertainty caused by Brexit, we don’t expect the UK to become any less venerated as a top location for study and predict the upward trend to continue in 2019. Students are increasingly discerning when they select a university and the quality of amenity spaces is more important than ever to the success of schemes. With the private sector tendency towards individual rooms and amenity quality, there is a real opportunity for developers to meet increasing demand, in a market where students are not just weighing up the quality of their course, but the quality of facilities too. Over the coming year, we will see more re-provisioning of bed spaces into high-grade communal spaces and an increasing number of private-university partnerships to achieve outstanding living spaces for students close to academic buildings.”
The London market – home to the largest student population – continues to suffer from structural levels of undersupply, with the London Plan suggesting a need for between 20,000 and 31,000-bed spaces by 2025. However, development is being impacted by high land costs, competition from other uses and the impact of the Community Infrastructure Levy. An average private sector en-suite price of €246.20 (£223) per week in London is 74% more expensive than the national average on an annual basis. Activity is increasingly focused in Zones 2/3 and 4, as opposed to Zones 1 and 2 due to the high cost of development. Bed spaces can be delivered at lower costs here but rents in both inner and outer London are rising faster than the national average.
David Feeney added: “We are increasingly concerned that the cost of studying in London is pricing UK students out of the picture, leading to a brain drain to other UK cities. Since 2012/2013 UK full-time student numbers have grown nationally by 8%, but only by 1.4% in London, with international student numbers growing by 13%. There is an opportunity here for real product innovation as well as strong growth for outer boroughs such as Brent and Newham.”