The demand for modern, high-quality purpose-built student accommodation (PBSA) has risen in the UK, both from national and international students. However, Scotland has become a particular place of student interest. As education and student living gains popularity in the country, the PBSA sector is set for Scottish success. The demand for PBSA in Scotland is on the rise as a new generation of developers comes to the fore. Daryl Teague of Glencairn Properties discusses the phenomenon.
By Daryl Teague, Managing Director, Glencairn Properties
As part of the Teague dynasty of developers, Daryl Teague started his business at 24 years old and now has a pipeline of 500 PBSA beds across Edinburgh.
PBSA coming of age in Scotland
A recent report on the PBSA market, commissioned by the Scottish Government (Research on purpose-built student accommodation (PBSA) and Student Housing in Scotland), concluded that the PBSA market has been “a remarkable success”. Against a background of a sharply rising student population, the PBSA sector has effectively created an additional source of supply, relieving pressure that would have been hard to manage within existing stock or the willingness to offer the Private Rented Sector (PRS).
While there are of course challenges as the sector continues to mature, such as affordability, maintaining high standards of quality and sustainability, there remains a great opportunity for growth in the market. Edinburgh University continues to be a significant draw for students, especially internationally, as it was again named as one of the top 30 universities in the world by the Times Higher Education (THE) ranking. As a result of these drivers, our pipeline of work is now focused on PBSA in the Capital.
Developing runs in the family
My father was one of the brothers who founded Teague Homes, which at its peak built 400 homes per annum in Scotland (2007). It was around then that the PBSA market really started to become its own entity. In 2011, following in the family tradition of housebuilding, I set up my own business at 24 years old with my brother (who is a Director in the firm). Over the years we have seen the PBSA sector go from strength to strength, however, the same cannot be said of the SME developers who operate in it.
I know a lot of developers in Scotland, and I can safely say that is has been a very difficult time to be a smaller player in the market; we have seen a huge decline in SMEs over the last decade. In recent years, we’ve seen uncertainty and closures around Covid-19 and we’ve also had to deal with rising costs and supply chain issues, a lack of labour and, of course, planning. I’ve had a site stalled in planning for four years, which has tied up a significant amount of capital. Those kind of costs and delays can be catastrophic for a small business without our knowledge and experience
The importance of SMEs in both growth and quality
It is vital that we continue to encourage and protect the SME developers in Scotland to safeguard the quality and innovation in both PBSA and the wider housing market. SMEs are more design led, such as ourselves, and they can’t afford to landbank like PLCs, so they will always try and turn a scheme around quickly, investing in and regenerating an area. SMEs tend to be better regional economic drivers as well, employing local labour and sourcing from local suppliers, rather than relying on national supply chains and labour contracts.
Funding can also be a significant barrier or challenge for SMEs, and we have been extremely fortunate to be supported by Close Brothers Property Finance, who have financed our last two schemes; including our latest site in Fountainbridge, Edinburgh, which is 150 units, (subject to phase 2 planning). When there is uncertainty in the market you need to be able to count on your funder, and with Close Brothers that has always been the case. As part of the FTSE 250 Close Brothers Group, they have the ability to weather fiscal storms and are always flexible and supportive of us. Through their funding and initiatives such as the Tomorrow’s Developer network, they are supporting the next generation of SME developers in Scotland and across the UK.
What the future holds
While we don’t have a crystal ball and there are still a fair few macro geopolitical and financial risks looming beyond our control, the good news is that the current market continues to demonstrate strong demand for PBSA. We have not yet seen the severe slow down we were dreading at the end of last year and there is a still a great deal of equity and liquidity in the financial markets, alongside a strong appetite for higher education. Indeed, we are looking at a number of new sites with Close Brothers and we are seeing the same levels of interest in land.
My hope in 2023 is that we will see some tangible support by both Government and affiliated institutions, for more SME developers to set up or grow in Scotland. This will, by default, increase competition and have a positive impact on the quality, design, and cost of both PBSA and the wider residential housebuilding industry, as well as a positive economic ripple effect.