(Shutterstock)
A new report has revealed that the period 2022/23 – 2023/24 has been the strongest ever year for UK rental growth in the student accommodation sector, with Glasgow leading the way.
The UK Student Accommodation Report, compiled by Cushman & Wakefield, shows a 19.4% annual increase in rents in Glasgow, with Edinburgh experiencing growth of 11.2% and Aberdeen an 8.4% increase.
In the past decade, the number of full-time students has risen by 22,155 in Glasgow and 16,645 in Edinburgh. In the last three years, Glasgow’s student population has risen by 12,220, second only to London in growth terms, with Edinburgh not far behind with 7,085 additional students.
Cushman & Wakefield said the demand-supply ‘imbalance’ for student accommodation remains significant and although headroom in the market is still set to grow, the firm is predicting a ‘marginal slowdown’ in the rate of demand over the coming years.
The sector faces potential falls in entry rates and changes in government policy, as well as a ‘differing demand profile’ of towns and cities.
Cushman & Wakefield added that supply forecasts remain ‘concerning’, with just 12,195 new beds opening for 2023/24, the lowest annual figure for PBSA delivery for ten years. No new beds have opened in major markets including Glasgow, Manchester, and Bristol, with only just over 330 new beds opening in London. Just four further markets (Nottingham, Edinburgh, Leeds, and Colchester) account for nearly half of all new supply.
As at the end of August 2023, of the 38 available direct let schemes in Glasgow, 30 were sold out. In Edinburgh, 35 of the 45 were sold out. At occupancy rates of 79% and 78% respectively, these sat ahead of all other UK locations other than Bristol which comprised 83% occupancy.
The quality of accommodation is said to be increasing with the provision of greater facilities but, there are concerns regarding affordability. Rising operational and development costs, high inflation and a decline in new bed delivery has driven rental growth for both university and private sector accommodation.
Murray Strang, managing partner for Cushman & Wakefield in Scotland, said, “From an investor perspective, interest remains largely focused on prime, modern assets of £30m to £100m lot sizes, as well as older, well-located stock with strong refurbishment angles. Fundings remain popular, despite increased recent debt challenges. The market is usually dominated by international, institutional buyers, although of late we are seeing increased competition from home grown entities.
“A lack of portfolios coming to market is having a substantial impact on transactional volumes, however while deal numbers are down, Cushman & Wakefield has full national coverage on current pricing, having transacted in Bristol, Manchester, Nottingham and Coventry so far this year and at present, with investor appetite remaining strong, have deals proceeding in Brighton, London, Edinburgh, Aberdeen, Plymouth and Sheffield.”
The report examines supply, demand, affordability, investment & debt and legislation changes. Other revelations show that over 75% of students are concerned rising costs may affect academic outcomes.
The Scottish loan system differs to the rest of the UK and analysis shows the average Scottish student will receive 28% more than an English student in 2023/24.
The report concludes that investors in student accommodation need to seriously consider affordability challenges to avoid an over-saturation of high-end developments overlooking the demand for more affordable options.
