The purpose-built student accommodation market could face a potential shortfall of 620,000 student beds by 2028, relative to the 36,000 beds currently identified as being delivered in that period.
According to CBRE, the predicted shortfall is based on the assumption that the student population grows by 1% per annum for the next three years.
At the same time, the sale of buy-to-let homes has contributed to an estimated loss of approximately 10% of the UK’s private rented stock since 2016, impacting the largest accommodation pool for students.
In addition, the number of HMO licences in England has fallen by -4%, according to local authority housing statistics, resulting in 60,000-90,000 fewer beds for students.
Just 9,000 PBSA beds were delivered last year, and CBRE predicts that only 14,000 will be completed this year. This figure is significantly lower than the historic average of 30,000 beds delivered per year. Planning conditions, elevated construction costs, and the rising cost of debt have all influenced the supply pipeline and development viability in the sector.
However, CBRE said institutional investors have demonstrated interest in the sector. Just under £4bn worth of investment deals took place in 2023 alone.
Oli Buckland, executive director of residential capital markets at CBRE, said: “There is a significant wall of capital targeting the living sector in the UK. PBSA yields are typically wider than build-to-rent yields, and CBRE’s PBSA Index has shown an average total investment return of 10.8% in the last 12 years. These consistently strong returns, coupled with the availability of income-producing opportunities, are attracting new and returning capital – both domestic and international.
“The development of PBSA still faces headwinds. However, with conditions predicted to become more viable in 2024 and the current scarcity of quality built stock, institutional investors will return to forward fund new developments. There is a window of opportunity to fund schemes in core markets and partner with quality developers delivering schemes with the highest of ESG credentials.
“Leveraging this investment capital would make it possible to address the chronic shortage of student accommodation our university sector is facing, which will only intensify in the next five to 10 years.”
Image © Unite Students
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