1

Some 29,000 purpose-built student bedrooms are due to be completed across the UK by the start of the 2019/20 academic year, according to an analysis of pipeline development data across more than 60 university towns and cities in the UK, up 25% from 23,000 in 2018/19.

In total, these new additions will lift the overall number of purpose-built student bed spaces by 5.1% to over 600,000. A further 14,000 bedrooms are under construction or in planning and due to be delivered in during the 2020 and 2021 academic years, although this total may rise as new applications are approved.

The majority of PBSA rooms are operated by universities, accounting for 64% of the current stock. Of this, however, 38% is actually privately owned and leased back to universities. As universities seek to improve or replace older stock, this could represent an opportunity for further collaboration and investment into the sector from private developers.

The private sector is playing a growing role in providing new accommodation for students. In total, private developers will build 82% of the total beds due to be completed by 2021, and nearly 90% of the beds due to be built for the 2019/20 academic year.

The type of stock in the pipeline is also changing. Our analysis of schemes under construction indicates a shift away from studios towards en suite rooms arranged in cluster flats, which traditionally command lower rents. Some 68% of the units under construction are categorised as cluster flats with shared kitchens and lounge areas. The remaining 32% are studios.

This represents a shift in development trends, as the market reacts to perceived affordability pressures in some key cities, and changing student demands.

A recent survey of 70,000 students undertaken by Knight Frank and UCAS

showed conclusively that value for money is the key driver in the accommodation choices of students. The survey also highlighted the importance of location, quality and the option to live in friendship groups as underpinning student happiness in private PBSA.

The development trend towards affordability is expected to continue, though rising development costs are likely to place upward pressure on pricing. However, as ever, well-located assets in strong markets will prosper and demonstrate high occupancy and rental growth across different accommodation types.

UK STUDENT HOUSING UPDATE

UK STUDENT DEVELOPMENT PIPELINE UP DESPITE UNCERTAINTYThe number of bed spaces due to be built for the 2019/20 academic year is 25% higher than last year, analysis shows. An increase in the development pipeline highlights the resilience of the sector, despite wider uncertainties.

Traditional safwe haven assets like gold and secure government bonds have seen fresh investor inflows in the first quarter of the yearw

FIGURE 1 Development pipeline of purpose built student accommodation Projected volume of new student bedrooms by year of completion

FIGURE 1 Who is building new bed spaces? for 2019/20, private sector/university split

“With a significantly larger pipeline this year, confidence in UK PBSA remains undiminished.

Affordability will remain a key focus for owners, operators and students and our analysis shows a shift in development towards shared accommodation in response. Schemes that provide clear and obvious elements that add value will attract the strongest demand.”

JAMES PULLAN Global Head of Student Property

Source: Knight Frank Research Source: Knight Frank Research

29,000 14,400*

2019/20 2020/2021Private sector

University

89% 11%

*provisional

32

UK STUDENT HOUSING: DEVELOPMENT UPDATE 2019/20

HIGH PIPELINE MARKETS

What: Markets with high levels of new bed spaces under construction relative to existing stock levels. These markets typically have a broad appeal to a wide range of students. However, sustained increases in student numbers will be important to achieve future rental growth.

Where: Coventry, Sheffield, Swansea Existing stock

MATURE MARKETS

What: Strategic cities containing dual or multiple well-regarded universities, and large numbers of students. These markets have a historically high availability of development land, and have seen large amounts of PBSA development in recent years. It is important that new development is targeted at the greatest pool of occupier demand.

Where: Liverpool, Newcastle, Leeds Existing stock

SUPPLY-CONSTRAINED MARKETS

What: Markets where high competing land values and policy restrictions result in barriers to development. These markets have low pipelines of new stock, in spite of strong demand profiles.

Where: London, Brighton, Bath Existing stock

TRANSITION MARKETS

What: Cities that have experienced a boom in development but have not experienced matching growth in student demand, especially at the premium end of the market. Affordable products continue to be the primary driver of rental growth in 2018/19.

Where: Cardiff, Plymouth, Aberdeen Existing stock

DEVELOPMENT PIPELINE OF PURPOSE BUILT STUDENT ACCOMMODATION

Bristol

BrightonLondon

Edinburgh

Aberdeen

Newcastle

Durham

Leeds

Sheffield

Coventry

Where are new beds being built for 2019/20, split by property type Selected city markets. Please contact us for the full list.

0% 20% 40% 60% 80% 100%

Coventry

Sheffield

Swansea

0% 20% 40% 60% 80% 100%

Liverpool

Newcastle

Leeds

0% 20% 40% 60% 80% 100%

London

Brighton

Bath

0% 20% 40% 60% 80% 100%

Cardiff

Plymouth

Aberdeen

Source: Knight Frank Research

Cluster - Non en suite Cluster - en suite beds Studio beds

Key to map % cluster flats % studios

Cluster - Non en suite Cluster - en suite beds Studio beds

Cluster - Non en suite Cluster - en suite beds Studio beds

Cluster - Non en suite Cluster - en suite beds Studio beds

Source: Knight Frank Research

Source: Knight Frank Research

Source: Knight Frank Research

74%

26%

18%

82%

38%

62%

3%

100%

69%

31%

53%

47%

BirminghamSwansea

Cardiff

Bath

68%

32%

UK

Plymouth

98%

97%

2%75%

25%

Exeter

54%

49%

46%

51%

59%

41%

Glasgow

Manchester

50%

50%

Liverpool

65%

35%

71%

12%

74%

29%

88%

26%

1%

20%

99%

80%

4

UK STUDENT HOUSING: DEVELOPMENT UPDATE 2019/20

STUDENT PROPERTY UK James Pullan Head of Student Property 020 7861 5422 Neil Armstrong Head of Student Property Valuations 020 7861 5332 Jonathan Goode Partner, Student Property Valuations 020 3897 0034 Merelina Monk Partner, Student Property Agency 020 7861 5425 Rachel Pengilley Partner, Student Property Agency 020 7861 5418

GLOBAL CONTACTS

James Pullan Europe +44 020 7861 5422 Emily Fell Asia Pacific +65 6429 3591 Ben Schubert Australia +612 9036 6870 Joseph Morris Middle East +971 4426 7601 Ryan Lang America +512 637 1296

RESEARCH & CONSULTING

Matthew Bowen Europe +44 0117 945 2641 Paul Savitz Asia Pacific +612 9036 6811

Important Notice © Knight Frank LLP 2019 - This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank LLP for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank LLP to the form and content within which it appears. Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Our registered office is 55 Baker Street, London, W1U 8AN, where you may look at a list of members’ names.

Market View: CA Ventures

RECENT MARKET-LEADING RESEARCH PUBLICATIONS

Knight Frank’s analysis demonstrates a healthy pipeline of new purpose built student accommodation over the next three years. Furthermore, as is noted in the report, the onus is increasingly falling on the private sector to deliver new stock.

There are challenges, however, not least those arising from rising build and site costs which are putting pressure on margins, especially at the more affordable end of the market. This will play a key role in shaping the PBSA pipeline in the coming years.

At CA Ventures, our strategic focus over the next three years is to develop 6,000 bed spaces units in targeted cities both in the UK and Europe.

Our view of the market is reflected in the findings of the Knight Frank/UCAS Student Accommodation Survey which shows a preference for high-quality

accommodation that provides clear and obvious elements that add value.

As the market evolves, however, so must the product. Many of the features of accommodation that add value now will become standard in the future and the sector must adapt accordingly.

While changing demographics and fluctuating student numbers arising from uncertainty surrounding Brexit could pose short-term challenges, our longer-term view of PBSA in the UK is positive.

We see further provision of high quality accommodation as a necessity if the UK is to continue attracting international students at the same level. Accommodation choices will increasingly influence the decisions that students make on where to study, and, as a new entrant to the UK market, this provides us with an opportunity to listen and respond to these changes.

CHRISTIAN DAVIS Christian Davis Vice President Acquisitions, Europe at CA Ventures

UK STUDENT HOUSING UPDATE

Student property investment totalled £4bn in 2017, up 25% on the previous year. This strong performance looks set to continue in 2018, despite the current uncertainty surrounding Brexit. The enduring strength and quality of the UK’s Higher Education sector remains the key driver.

January deadline data from UCAS reinforces this view. Despite a slight drop in total applicant numbers, down 0.9% compared with 2017/18, which reflects the smaller cohort of those turning 18 over the last year, a record 36% of A-level students across the UK applied for higher education courses in 2018.

Applications from international students also increased, bucking the downward trend seen in 2017 when uncertainty surrounding the UK’s future relationship

with Europe contributed to a decline in applications from within the EU, although the numbers coming to UK universities remained high due to above-average acceptance rates.

In the 2018/19 cycle, applications from within the EU were 3.4% higher year-on-year, with an 11.1% increase in applications from non-EU applicants. Overall, applications from outside of the UK increased by 7.6%, highlighting the enduring popularity of the UK as a place to study and live.

The number of students accepting places at UK institutions has increased over the long-term. In 2017/18, over 200,000 18-year olds and 70,000 students from outside the UK accepted places, the highest on record.

SEARCH FOR QUALITY UNDERPINS APPLICATION NUMBERSDemand for UK Higher Education remains strong despite uncertainty over EU funding and the inclusion of international students in government migration targets.

Key factsTotal applicant numbers for UK higher education courses for the 2018/19 cycle fell by 0.9% year-on-year, according to UCAS data

However, a record 36% of A-level students across the UK applied for courses in 2018

Applications from within the EU were 3.4% higher year-on-year, with an 11.1% increase in applications from non-EU applicants

The number of 18-year olds in the UK is projected to increase by 103,000 between 2021 and 2025, underpinning future demand

PBSA represents around 30% of full-time first-year undergraduate housing choices, up from 22% five years ago

JAMES PULLAN Head of Student Property

“ Demand for Higher Education in the UK remains strong. Universities that are perceived to offer the highest quality courses in locations offering the best overall student experience will increasingly attract higher levels of students.”

Source: Knight Frank Research / UCAS

FIGURE 1

University applicants by domicile Indexed 100 = 2009/10, full year (data for 2018 at January deadline)

FIGURE 2

Applications by university tariff band Indexed 100 = 2009/10, full year (data for 2018 at January deadline)

Source: Knight Frank Research / UCAS

80

100

120

140

160

180

200

220

2018

/19

2017

/18

2016

/17

2015

/16

2014

/15

2013

/14

2012

/13

2011

/12

2010

/11

2009

/10

UK EU (excluding UK)

Non-EU Total

80

90

100

110

120

130

2018

/19

2017

/18

2016

/17

2015

/16

2014

/15

2013

/14

2012

/13

Lower tariff Medium tariff

Higher tariff All

STUDENT ACCOMMODATION

SURVEY 2018/19

STUDENT ACCOMMODATION

SURVEY 2018/19

Student Accommodation Survey 2018 FINAL.indd 1 16/11/2018 11:13

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