Both Empiric and Unite have reported 99% occupancy during 2022 and reservations are already at a record level for 2023/24. With acute supply and demand pressures requiring the sector to respond, The Property Marketing Strategists held a roundtable with LOFT, Sheppard Robson, Fjield Consulting and Student First Group to look at investment in the sector, innovations to design, and changes to policy.
Facilitated by Deenie Lee and Sarah Canning from The Property Marketing Strategists and Aceil Haddad from MATT PR, participants included Elizabeth Jackson and Tom Forder from LOFT, Martin Hadland from Student First Group, Rupert Goddard from Sheppard Robson, and Scott Blakeway from Fjeld Consulting.
“If you’re thinking about the peak in the number of 18-year-olds now, you’re already behind. If you haven’t yet identified a site, it will take two years to procure, another year to plan and another two years to build that brings us to 2028.”
Martin Hadland, Founder and Managing Director (MD), Student First Group
This is a chilling reality check for the sector, for cities and universities needing student accommodation.
“Investment into PBSA has never been stronger.”
Tom Forder, Head of Projects, LOFT.uk
Tom Forder reported that they’ve seen a surge of HMO companies, investors and operators coming into the market and acquiring portfolios. While there has been a slowdown in cash moving into the sector with the increased cost of borrowing, there remains a steady confidence in student accommodation – but its continued success rests on whether it can diversify.
At present, the success of PBSA is due to demand outstripping supply. However, for its longevity – especially against a backdrop of a cost-of-living crisis, a potential recession and changes to education with the political push for apprenticeships, immigration changes for students and HMO landlords leaving the sector – developers of PBSA must diversify their offer.
“[A simple way of doing this is] offering a range of accommodation within the same building, from ensuite studio flats through to affordable apartments with shared bathrooms and everything in between.”
Deenie Lee, Co-Founder, TPMS
To aid this, there needs to be investment in innovation and design – which brings with it some risk along with huge potential reward.
“Someone’s got to be brave and put their money behind it. For a client recently, we designed PBSA with clusters of ten down to one bedroom. We ripped up the rule book and the resulting product diversity went down well with the students and university.”
Rupert Goddard, Partner, Sheppard Robson
In research by The Property Marketing Strategists last year, it found that most students didn’t want to pay more for amenities such as dining rooms, cinema rooms or even gyms.
“By putting in cinema rooms, bowling alleys and rooftop terraces, it’s so a particular rent can be achieved.”
Scott Blakeway, Fjeld Consulting
The removal of ‘added’ amenities could mean the consolidation of space for more beds, especially affordable if non ensuite or smaller.
With The Renters Reform Act, new EPC regulations for landlords and increased pressure from mortgage rates, there are going to be a lot of private landlords that are going to sell up.
“And that’s a good thing because this will professionalise the HMO industry, though the net impact already is there are fewer HMOs providing an opportunity for PBSA long term.”
Tom Forder, Head of Projects, LOFT.uk
Meanwhile, there are policy challenges afoot; PBSA is currently classed by local planning authorities as a sui generis use as it does not fall within a traditional use class. Therefore, many PBSA planning permissions come with restrictive planning conditions – which limit the use and occupiers of the buildings – for instance, accommodation only for registered students at the university.
“PBSA is limited as it’s for full time students, with operators seeking 51-week contracts where they can because they don’t want the building partially full for the whole of summer.”
Martin Hadland, Founder and Managing Director (MD), Student First Group
Likewise, the sector looks at PBSA in terms of rooms and not flats.
“This too is problematic, as some of the PBSA stock we have in challenging markets isn’t full because five university friends cannot move into a six-bedroom flat – they might go to an HMO instead.”
Scott Blakeway, Fjeld Consulting
Policy makers need to respond, both opening the market – allowing for part-time students and those on apprenticeships, but also relax planning permissions, leaseholder agreements to reduce the cost burden on the operator and allow much needed flexibility to enable the PBSA sector to thrive.
Another pressure on the sector is the ESG agenda from investors, developers, and end-users from design process through to procurement and day-to-day usage.
“Sustainability features are generally baked into design, but at LOFT we’re concentrating on how we can repair, recycle and replace our furniture, but the reality is that people aren’t letting us know when things are damaged until far too late to recover them.”
Tom Forder, Head of Projects, LOFT.uk
“To really embrace the ESG agenda, the sector needs to embrace technology.”
Elizabeth Jackson, Marketing Director (MD), LOFT.UK
With students being tech-literate, developers and operators need to utilise technology to support the Environment, as well as the Social and Governance demanded.
The UK housing crisis includes student accommodation, and with the PBSA sector best suited to offer housing outside of the university campus, it is a huge growth area in the right aspect of the market.
“But it shouldn’t be a high-end product, especially considering the lower end of the market is being stretched with HMO beds coming out of the market, and first-generation refurbs. A fresh look needs to be adopted for utilising design and technology aided with the support of policy changes.”
Sarah Canning, The Property Marketing Strategists
