a cobblestone street lined with tall brick buildings

The UK’s major university towns are facing a shortage of more than 350,000 beds, as demand continues to outweigh both the supply and delivery of student accommodation.

Global real estate advisor, CBRE, has 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, growing 45% since 2017/18.

Supply and demand imbalances exist throughout the UK and CBRE’s analysis revealed that in Manchester just 4,745 beds have been delivered since 2018 but the need for purpose-built student accommodation (PBSA) has grown by 8,100 full-time students in that time frame. This means that Manchester is one of the most undersupplied major university cities outside of London.

Despite the substantial student population, local planning policy has enforced an effective moratorium on development of student accommodation which has constrained new development. Manchester now has one of the most pronounced supply and demand imbalances of student accommodation of any city in the UK, with an identified shortage of 23,186 beds within the city, prompting a review of planning policy and a renewed surge in development activity.

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Manchester has excellent universities with a strong history in academia and innovation. The University of Manchester is a cornerstone of the City’s recent success, attracting and retaining students whilst offering pioneering research and educations in advanced materials, biotechnology and computer science to claim international recognition.

However, Manchester is currently experiencing a severe undersupply of Purpose Built Student Accommodation (PBSA). As a consequence, CBRE’s recent Which City? Which Sector? Report highlights Manchester as the number one city in the UK for PBSA investment growth in the next ten years.

Tom Sinclair, Head of Residential Investment, North at CBRE noted:

“The limited supply of new PBSA development in Manchester has captured the attention of investors, creating one of the most sought after real estate markets in the UK. Both Developers and Investors are actively monitoring new opportunity in the city as they look to secure new PBSA accommodation to meet the surging occupational demand.”

Oliver Buckland, Head of PBSA Transactions at CBRE noted that:

“The number and variety of universities within the city has resulted in strong demand fundamentals, with Manchester having the third largest student market of all UK Cities but some of the lowest development activity over the past 10 years.

“The UK’s student population is the largest it’s ever been, and undergraduate applications are forecast to grow by 25% 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.”

Tim Pankhurst, Head of Student Accommodation Valuation at CBRE said understanding the nuances to each town’s market was essential due to the cyclical nature of the PBSA sector and how this impacts student accommodation development.

“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.”

Looking further at the investment market, CBRE’s analysis identified London and the UK’s super prime locations including Manchester, to have a greater opportunity for rental tension compared to some prime and secondary locations. Robust rental growth has been underpinned by long term demand and supply fundamentals as well as stabilising operational costs.

 

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