• Significant shortage of PBSA beds expected to deepen, says CBRE 
• Greater London supply gap has grown 45% since 2017/18 

The UK’s major university towns are facing a shortage of more than 350,000 beds, as demand continues to outweigh both the supply and delivery of student accommodation. 

Global real estate advisor, CBRE, has analysed the latest available supply and demand data across the 30 largest university towns and cities. The research found that in Greater London alone, there is a supply gap of 106,000 beds, growing 45% since 2017/18. 

Supply and demand imbalances exist throughout the UK and CBRE’s analysis revealed that in Bristol, just 2,900 beds have been delivered since 2018 but the need for purpose-built student accommodation (PBSA) has grown by 8,000 in that time frame. While in Glasgow, 3,400 beds have been delivered since 2018, but the need has grown by over 13,000. Major markets including Nottingham, Manchester and Liverpool are also facing similar scenarios. 

Tim Pankhurst, Head of Student Accommodation Valuation at CBRE said understanding the nuances to each town’s market was essential due to the cyclical nature of the PBSA sector and how this impacts student accommodation development. 

“Not all markets are experiencing chronic shortages right now. Some are seeing more delivery than growth in terms of unmet demand, and some markets have sustained levels. As an example, Edinburgh has remained consistent in terms of its unmet demand levels despite delivery of PBSA however we expect this to change as the planning environment is making delivery increasingly difficult. 

“Nottingham has one of the larger development pipelines of beds but because delivery has been staggered supply has not kept pace with the growth in demand. Brighton’s two higher education institutions are restricted from further student growth until more beds are available. It isn’t necessarily a bad sign if levels of unmet demand haven’t grown, it often points to where the market is in its cycle. That being said, and regardless of where most markets are cyclically, there’s a clear lack of supply and demand that needs to be met urgently. 

“The total returns for all living sectors will be strong in 2023, and yields are less volatile than other sectors, however we’re being met with limited deal flow.” 

Looking further at the investment market, CBRE’s analysis identified London and the UK’s super prime locations, such as Bath, Bristol and Manchester, to have a greater opportunity for rental tension compared to some prime and secondary locations. Robust rental growth has been underpinned by long term demand and supply fundamentals as well as stabilising operational costs. 

Oli Buckland, Head of PBSA Transactions at CBRE, noted investment transactions in the market were returning but almost exclusively off-market as equity sources come to grips with pricing and relative returns. 

“The UK’s student population is the largest it’s ever been, and undergraduate applications are forecast to grow by 25% to one million by 2030. There’s real opportunity across the country for landowners and developers and we have institutional funds actively seeking opportunities, that satisfy stricter, greener criteria. 

“This gap we’re seeing between supply and need for PBSA highlights the mismatch between the pace of delivery and growth in the student population and the chronic need for accommodation. There will be a cost to investors who don’t act now as opportunities are scarce and demand is strong in both the rental and investor markets.”