Back in September, student accommodation made headline news with some universities struggling to house their latest intake of freshers as the academic year started. A month or so later, the issue was back in the news with providers reporting unprecedented demand from students as they raced to secure accommodation for 2023.
By Stephen Spiller, Partner, Rider Levett Bucknall
We know this demand is only going to increase. University student numbers continue to grow strongly year on year and after factoring in current accommodation delivery plans, StuRents, the UK’s largest student rental service predicts this will result in a shortfall of around 450,000 student beds by 2025.
While the underlying demand for purpose-built student accommodation (PBSA) is as high as it has ever been, the mix of factors impacting the supply has never been as complex.
Cost, cost and more cost
For every client, the costs of developing schemes have risen beyond forecasted expectations. The ongoing war between Russia and Ukraine and escalating inflation has impacted both the price and the supply of construction materials, resulting in a level of uncertainty around project cost and delivery schedules. We are starting to see costs settling which should continue into next year, but clearly there is a nervousness in the market around committing investment whilst we navigate this ongoing uncertainty.
As well as construction costs increasing, the operational costs when accommodation schemes are up and running are also on the rise through increased energy and labour costs. The demand for accommodation is not in any doubt, but the price point and how much cost can be passed onto the end user, ie the student, is an interesting question.
Can we get better at adopting MMC?
With construction costs rising there are some interesting challenges for our industry and looking at ways to introduce value has never been more important. The PBSA market is a prime sector to adopt modern methods of construction (MMC) – such as offsite manufacture, but it’s been slow off the mark. If planned correctly, MMC can reduce programmes by up to 25% and reduce wastage, with increased levels of Health & Safety.
However, MMC needs early commitment, often with up-front costs, and this has been difficult to align with main contractors’ abilities to commit to lump sums in the current market. But adopting new technologies and solutions, and looking at ways to collaborate and share risk, has to be a major priority if we are going to shift the dynamics.
Increasing international students
The number of international students applying to study at British universities, who traditionally are drawn to PBSA for its security and reliable quality, shows no sign of slowing down. Added to this, with Sterling weak against other currencies, PBSA rentals are proving to be increasingly good value and an attractive option for international students. So, it’s no surprise that the new accommodation schemes that universities are planning have this particular market in mind.
Keep the focus on net-zero carbon
And finally, in the drive to deliver cost effective accommodation for the future, we must make sure that we don’t lose focus on achieving net zero carbon buildings for universities and developers. From embedding sustainable technology as part of the build through to providing data around energy patterns and efficiencies when up and running, we must place this front and centre. This is certainly the conversation we are having with all of our clients at Rider Levett Bucknall. Introducing Passivhaus, either to new-builds or retrospectively, is a great way to optimise embodied carbon through efficient use of materials and drastically reducing the heat and cooling plant.
Moving into 2023, one thing is for sure, we will still be navigating choppy market conditions. But we mustn’t let that detract from the positive underlying trends of the sector. It is absolutely up to us as an industry to work together to implement the right technologies and innovations to build on the rising opportunities for PBSA.