Student Accommodation Supply Shortage Still Exists in Many University Towns

London, 3 September 2010 – As students head off to university over the coming weeks, new research from CB Richard Ellis reveals that there is a still a shortfall of appropriate accommodation in many of the UK’s most prestigious university towns. The popularity of Russell Group Universities, such as London, Edinburgh and Bath, coupled with a shortage of suitable development sites in these historic towns, suggest that the supply and demand imbalance is likely to persist.

Tighter planning regulations could create obstacles for developers going forward as it becomes harder to get consent, particularly for large schemes. If a scheme is not linked to a university, S106 contributions could become payable with affordable housing being delivered in conjunction with student accommodation. There is little evidence to establish if this would be a successful combination of uses, but if implemented it could undermine the viability of many schemes especially in high value areas.

The student accommodation market has outperformed all other property sectors over the last five years, but there has been a marked slowdown in growth. Average rents increased by 6.6 per cent to £98.99 per week between 2008/09 and 2009/10, down on the previous academic year but still well ahead of growth in other sectors.

Challenges could lie ahead for the sector as cuts to higher education funding and affordability concerns impact on future student numbers. However, any decrease could be offset by the ongoing influx of international students and the poor jobs market diverting more people into higher education to ‘sit out’ the poor economic conditions.

Jennet Siebrits, head of residential research at CB Richard Ellis commented:

“It is unlikely that the rapid growth we have seen at the top end of the market will continue, as many private providers have cut their prices this academic year in order to remain competitive and keep occupancy rates high. We expect rental growth to remain steady and in line with inflation, with stronger prospects in the mid-market due to the heightened demand for cheaper accommodation.

“Cuts to higher education funding will force universities to divert finance away from estates towards teaching and research. Many universities would therefore welcome private initiatives to improve their student housing stock and ensure the institution is attractive to both domestic and international students.

“Developers therefore need to work closely with universities to deliver the right accommodation to meet their students’ needs. They should look to provide a variety of price points within a scheme to hedge against the rising cost of education and ensure high occupancy.

“While opportunities clearly exist in the current market, developers will need to understand the supply and demand intricacies of each individual locality, and demonstrate the social and economic benefits of each scheme to local area.”

Download the Student Accomodation Q3 ViewPoint here
Download the Student Accomodation Q3 ViewPoint here