CBRE analysed the latest available supply and demand data across the 30 largest university towns and cities. The research found that in Greater London alone, there is a supply gap of 106,000 beds, up by 45 per cent since 2017/18.
Examples of supply and demand imbalances across the country in CBRE’s analysis include Bristol, where just 2,900 beds have been delivered since 2018 but the need for PBSA has grown by 8,000 in the same period. In Glasgow, 3,400 beds have been delivered since 2018, but the need has grown by more than 13,000. Major markets including Nottingham, Manchester and Liverpool are facing similar scenarios.
CBRE’s analysis identified London and the UK’s prime locations, such as Bath, Bristol and Manchester, to have a greater opportunity for rental tension compared to some secondary locations. Robust rental growth has been underpinned by long term demand and supply fundamentals as well as stabilising operational costs.
Tim Pankhurst, head of student accommodation valuation at CBRE, said: “Not all markets are experiencing chronic shortages right now. Some are seeing more delivery than growth in terms of unmet demand, and some markets have sustained levels. As an example, Edinburgh has remained consistent in terms of its unmet demand levels despite delivery of PBSA, however we expect this to change as the planning environment is making delivery increasingly difficult. Nottingham has one of the larger development pipelines of beds but because delivery has been staggered, supply has not kept pace with the growth in demand. Brighton’s two higher education institutions are restricted from further student growth until more beds are available. It isn’t necessarily a bad sign if levels of unmet demand haven’t grown, it often points to where the market is in its cycle. That being said, and regardless of where most markets are cyclically, there’s a clear lack of supply and demand that needs to be met urgently. The total returns for all living sectors will be strong in 2023, and yields are less volatile than other sectors, however we’re being met with limited deal flow.”
Oli Buckland, head of PBSA transactions at CBRE, added: “The UK’s student population is the largest it’s ever been, and undergraduate applications are forecast to grow by 25 per cent to one million by 2030. There’s real opportunity across the country for landowners and developers and we have institutional funds actively seeking opportunities, that satisfy stricter, greener criteria. This gap we’re seeing between supply and need for PBSA highlights the mismatch between the pace of delivery and growth in the student population and the chronic need for accommodation. There will be a cost to investors who don’t act now as opportunities are scarce and demand is strong in both the rental and investor markets.”