The Purpose-built Student Accommodation (PBSA) sector has seen record growth in the UK in 2019.
In the past decade, universities have become a prominent player in the UK economy. This is due to the sector becoming increasingly commercialised. According to a recent report by the UK’s largest student accommodation portal: ‘StuRents’, the UK PBSA Sector saw a staggering growth rate of 5.3% in 2019.
This reflects growing demand for purpose-built student housing due to an increase in student numbers which has led to rapid growth in this sector.
The UK is the second largest market for PBSA outside of North America and investment in the sector is set to reach £53 billion by the end of the year.
Furthermore, the demographic curve is due to tick on the upward scale, which will see an increase in the number of students of school-leaving age in the population, many of whom will be looking to start university. All this forecasts growth potential in the market.
Following the government’s decision to remove the cap on student numbers in 2015, tens of thousands of new entrants have flooded the market, domestically alone. Furthermore, we are seeing an increased flow of international students, despite the uncertainty of Brexit.
At present, there are approximately 2 million students in the UK; 750,000 of whom are first year students or come from abroad (who form the traditional consumer base for PBSA). Accommodation is a key consideration for all students, especially among these demographics.
Currently, there is a structural undersupply in the UK PBSA market; with only 600,000 bed spaces available for a consumer base of 3/4 million. It is broadly predicted that student numbers will continue to rise in the coming years, and current building projects are gradually set to deliver 120,000 more bed spaces in order to satisfy growing demand.
Leeds is fertile ground for growth in the PBSA sector. It has a student population of 60,000 spread across 3 universities, making it one of the largest student cities in the country.
Furthermore, the University of Leeds is internationally recognised as a strong university, and its excellent reputation abroad draws many international students for study. There are currently 9000 international students at the University of Leeds alone, further consolidating the city’s suitability to PBSA projects.
PBSA companies have seen success in the stock market. Unite Students is one of the UK’s leading student housing providers. UTG stock is currently up +2.00 and share prices have steadily increased throughout the year.
Additionally, Goldman Sachs are looking to take competitor IQ Student Accommodation (IQSA) public or sell it and has valued the company at an impressive £3.5 billion. Furthermore, in June, the Unite Group received planning permission for the construction of a 928-bed development on Merrion Street, in Leeds City Centre. The site would increase Unite’s Leeds portfolio to nearly 5000 beds.
Attracting international students for study in the UK will be crucial in ensuring the continued growth of the PBSA sector. According to government figures, in 2018, 460,000 international students were educated in UK universities, and the government wants to increase this to 600,000 by 2030.
To facilitate this, various policies have been enacted in the short-term, such as extending student Visas, meaning that international students will be able to remain in the UK for up to 2 years after graduation.
Many international students are seeking a more structured university experience, usually managed accommodation. For the most part, PBSA residences are a more attractive option for international customers as they provide opportunities to socialise and meet people in addition to added security resources to ensure good mental health among residents.
The government has recognised the importance of international students to the success of British universities and the growth of the PBSA market. Professor Dame Janet Beer of university advocacy group Universities UK has said:
“International students contribute a huge amount to the UK, not only economically but also by enriching the international education environment in our universities for all students. Whilst their presence in the UK is worth an estimated £26 billion in direct and knock on effects, sustaining over 200,000 jobs in all parts of the UK, they bring much wider benefit to our academic and civic communities.”
With student numbers rising domestically and internationally, and issues such as security and mental health awareness firmly on the agenda, living in PBSA while at university is an increasingly attractive option for many students.
Sustained and growing demand is being matched with increased investment in new projects, and with current growth rates, many industry insiders consider the sector to be uniquely poised as a stable property investment avenue post-Brexit.
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