Savills analysis shows PBSA supply/demand imbalance

Data from real estate firm Savills shows that purpose-built student accommodation (PBSA) stock is being stretched, as the sector struggles to keep up with rising student numbers in the UK.

Research by Savills suggests that there is a PBSA supply and demand imbalance, as the number of developments aren't increasing with the rising number of students. Image credit: Savills | PBSA News
Research by Savills suggests that there is a PBSA supply and demand imbalance, as the number of developments aren't increasing with the rising number of students. Image credit: Savills.

Savills have found that the number of students attending UK universities is rising year-on-year, both on a native and international scale.

Because of this, the supply of PBSA will need to increase to accommodate the increase.

Currently, the total pipeline is around 144,000 beds nationally (on schemes with at least 20 beds) according to Savill’s analysis of data from Glenigan.

Of this, only a quarter is under construction. However, the beds are not spread evenly.

Particularly, there are hotspots for PBSA development in cities that hold the largest student populations, such as London, Nottingham, Leeds and Birmingham.

Together, these markets account for just under two-fifths of the pipeline by number of beds.

“To alleviate this pressure, more PBSA stock must be delivered, especially given that the wider rental market has seen such a dramatic fall in supply as well as a surge in demand, with rents increasing steeply as a result.” 

Richard Valentine-Selsey, Director, Head of European Living Research, Residential Research, Savills

When comparing the size of the pipeline to the existing provision of PBSA, these markets don’t top the table.

Instead, it is the smaller markets of Newcastle under Lyme, Leamington Spa and Ipswich, where the known pipeline is equal to around three quarters of the existing stock.

However, there isn’t enough accommodation for students living and studying in these cities.

Markets such as Bristol, Durham and Manchester have had to house students in other nearby cities or have offered money to students to defer entry or live at home.

These measures all negatively impact the quality of the student experience and highlight the pressing need to increase the provision of PBSA.

Last year, the level of university acceptances continued to rise in around half of university towns and cities, indicating further growth in first years for the 2022/23 academic year, Savills found.

“More students mean an even greater need for PBSA. This is further compounded by the shortage in rental supply, with Savills’ report finding there were 31% fewer 5+ bed properties listed for rent in Q1 2023 compared with the pre-pandemic average. With a number of cities showing strong growth in student population and rising applications, there is huge opportunity for developers seeking out hotspots for PBSA development, and Savills’ PBSA Development League Table signals those areas that are deemed most attractive in the current climate. Developers would be wise to explore the sector and capitalise on these prime conditions.”

Eliot Kaye, Managing Director, Puma Property Finance

Other university cities such as Canterbury and Bath have witnessed strong growth, with 22,090 students accepted at the former and 9,615 at the latter – 8,885 and 3,345 more than in 2021, respectively, driven by Bath Spa and Canterbury Christ Church.

These cities already face constrained supply, with student-to-bed ratios of 3.6 in Bath and 3.9 in Canterbury.

Alongside this, they both have very limited new supply in the pipeline; there are only around 850 beds coming forward in Bath and 140 in Canterbury.

The number of larger properties, that would typically be HMOs, is down by -31% in Q1 2023 compared with the 2017-19 pre-pandemic average.

This has been driven by substantial buy-to-let mortgage redemptions and only serves to further limit the housing options for students.

However, the current supply and demand dynamics have created opportunities for investors to deliver much-needed PBSA developments, despite challenges to the sector such as the price of land and increased construction costs.

Both Empiric and Unite reported that they reached 99% occupancy during 2022, with Empiric reporting like-for-like growth of over 5%.