The Landscape of Student Accommodation in UK

Higher Education and student accommodation in the UK

Higher Education in the United Kingdom (UK) has been a large contributor to the UK’s economy, generating billions from international students. The UK is home to many ivy league universities such as Oxford, Cambridge, University College London, and the likes, making it a popular country for students pursuing their higher education, naturally causing student accommodation to be a necessary, high priority infrastructure for the UK’s economic growth.

UK Purpose-Built Student Accommodation Sector and how it has fared

Over the past few years, UK Purpose-Built Student Accommodation (PBSA) has gained a reputation of being a relatively high-yielding asset class with counter-cyclical qualities. This means that the value of student accommodation as an asset class tends to be negatively correlated to the current state of the economy. And true enough, despite the Covid-19 pandemic and tensions around Brexit, applications from international students to study in the U.K for the 2020/2021 academic year reached a record high of more than 138,000 in June, according to data from the Universities and College Admissions Service.

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Covid-19 Impact on PBSA Providers

However, the complexities and challenges that come with the recent discovery of the second strain of the novel coronavirus have seen student accommodation providers in the UK brace themselves for an uphill battle. This new landscape and circumstances have drastically dampened demand for accommodation as many international students opt to stay in their home countries to attend online universities, much to the demise of PBSA providers. Data from market research firm, Bonard and student housing marketplace, Student.com alike, shows a 29% decrease in UK student accommodation bookings during these tough times. The importance of international students cannot be understated in the UK PBSA market. The living capital markets chairman at real estate firm JLL, Philip Hillman even claimed that some PBSA had up to 4 international students for every 5 occupants. Meanwhile, another student accommodation, Empiric Student Property PLC reports that total occupancy has fallen year on year in October from 94% in 2019 to 70%, with only 3 international students out of every 5 occupants.

Outlook

These numbers paint a seemingly discouraging image that asset owners will experience a squeeze in short-term income caused by Covid-19 restrictions. But the value of UK student accommodation remains surprisingly strong, according to the real estate consultancy firm, Knight Frank. PBSA providers are now redirecting focus to the domestic market. Whilst not the most ideal demographic to target, they have proven to be remarkably resilient in their efforts.

Hopeful sentiments continue to surround the landscape of UK PBSA as demand coming from international students studying in the UK will likely bounce back to normal once the Covid-19 pandemic situation clears up in the long run. World-class universities that provide excellent tertiary education and a conducive environment, and the allure of the UK’s rich history, culture, and architecture, are part of the factors responsible for many international students’ desire to study in the UK. It is no wonder experts like Matt Beech, associate director of Colliers International, a real estate services firm, hold an optimistic outlook for the market.

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