"With the development rate as it currently stands and with inevitable planning delays, the supply cannot meet the demand needed to close the gap promptly. The student population is the largest it’s ever been, and development of student accommodation must be made a priority, ensuring it is not just available but affordable and accessible for all"
- Nick Reed - CBRE
New data from real estate advisor, CBRE, has revealed that headline rents for student accommodation across Britain’s major university towns and cities have outgrown and outpaced maintenance loans, as the shortage of accommodation and student beds intensifies.
The research highlighted Bristol as the most expensive city for Purpose Built Student Accommodation (PBSA) outside London with students expected to pay an average of £335-£382 per week for a bed space, just 3%-13% less expensive than in London.
CBRE analysed the PBSA Sector across the UK’s 30 major university towns alongside London. Outside of London, the maximum maintenance loan that can be secured by each student is £10,227 per annum, reflecting 18% growth since 2018/19. However, the average rent for an ensuite room per annum is £8,700, and a studio per annum is £11,950 – reflecting 27% and 37% rental growth respectively for the same period, and in 2024, maintenance loans will increase by only 2.5%.
Bristol, the most expensive city for PBSA outside of London, has an average price for a student bed space ranging from £335-£382 per week, while London averages £325-£433. In other parts of the UK, Manchester averages £249-£295 per week, Brighton averages £285-£341 per week, and Edinburgh averages £214-£301 per week.
Constrained supply and a fall in the delivery of student beds to the market have exacerbated rental growth. CBRE predicts that by 2028, the market could face a potential shortfall of 620,000 student beds relative to the 36,000 beds currently identified as being delivered in that period (assuming the student population grows by 1% per annum for the next three years).
Looking at Bristol, CBRE research found that just 2,900 beds have been delivered since 2018, but the need for PBSA has grown by 8,000 in that time frame.
Nick Reed, Director Residential Capital Markets, CBRE, said: “Bristol, being the most expensive city outside of London for PBSA, is becoming more and more unaffordable for students to live. With student bed space potentially costing £15,000 per Annum term and maximum maintenance loans being just over £10,000, there is a real exclusion problem that needs to be fixed. The reduced supply could price large numbers of young people out of the market and deter them away from higher education in Bristol.
“We have developments in plan here in Bristol such as the Unite Student development that has planning permission for 596 beds and will open in time for the 2025/26 academic year. However, this is not enough, and already this year, the Bedminster Green PBSA has been delayed until the Summer, which is a development comprising 484 beds.
"With the development rate as it currently stands and with inevitable planning delays, the supply cannot meet the demand needed to close the gap promptly. The student population is the largest it’s ever been, and development of student accommodation must be made a priority, ensuring it is not just available but affordable and accessible for all.”
According to the analysis, the sale of buy-to-let homes has contributed to an estimated loss of approximately 10% of the UK’s private rented stock since 2016, impacting the largest accommodation pool for students. In England, the number of HMO licences has fallen by -4%, resulting in 60,000 – 90,000 fewer ‘beds’ for students based on Local Authority Housing Statistics.
Meanwhile, only 9,000 new bed spaces were delivered to the PBSA market last year, which has become core to the provision of accommodation in university towns. Only 14,000 bed spaces are projected for this year. This figure is significantly lower than the historic average of 30,000 new bed spaces delivered per year. Planning conditions, elevated construction costs, and the rising cost of debt have all influenced the supply pipeline and development viability in the sector and the shortfall in beds is increasing.
However, data shows there is still ample interest in the sector from institutional investors, which can be leveraged to increase the supply of beds. Just under £4 billion worth of investment deals took place in 2023 alone.
Universities are increasingly looking to the private sector for the development of PBSA, as budgets become further constrained. One of the most recent examples includes Unite Students, the UK’s leading owner, manager and developer of student accommodation, entering into a joint venture framework agreement with Newcastle University for the development of 2,000 new student beds.
Oli Buckland, Head of PBSA Investment at CBRE said: “There is a significant wall of capital targeting the Living sector in the UK. PBSA yields are typically wider than Build to Rent yields, and CBRE’s PBSA Index has shown an average total investment return of 10.78% in the last 12 years. These consistently strong returns coupled with the availability of income-producing opportunities are attracting new and returning capital - both domestic and international.
“The development of PBSA still faces headwinds. However, with conditions predicted to become more viable in 2024 and the current scarcity of quality-built stock, institutional investors will return to forward fund new developments. There is a window of opportunity to fund schemes in core markets and partner with quality developers delivering schemes with the highest of ESG credentials.
“Leveraging this investment capital would make it possible to address the chronic shortage of student accommodation our University sector is facing, which will only intensify in the next five to 10 years.”
