Features: The student accommodation bubble

Laura Collacott, March 27, 2017

 

Statistics published by UCAS in February showed that the number of students applying for full-time undergraduate courses in 2017 have dropped five per cent for UK students and seven per cent for EU applicants.

After so many of the centre’s tower blocks have been turned over to student accommodation – typically costing as much as 40 per cent more to rent than the archetypal shared student digs – is there a danger of an oversupply of purpose-built student accommodation married with dwindling demand?

“[Bristol is] not yet oversupplied with student accommodation, but it is certainly getting tougher to hit 100 per cent let each year,” says Robert Loaring, operations manager of iQ student accommodation which provides 370 rooms in the city.

Commercial student accommodation is a growing industry, in Bristol and across the UK. Research by Knight Frank shows the market share owned by commercial operators has risen from 10 per cent in 2009 to 25 per cent in 2016 – equating to 3,441 beds – with more supply in the development pipeline.

Adam Horwood is head of marketing at Fusion Students which has 483 student beds in the city, many of them in Fusion Tower on Rupert Street offering residents facilities such as on-site gym, cinema and gaming rooms, as well as flat-screen TVs and ensuite bedrooms. The company, which claims to be the largest independent student housing company in the UK, has ambitions for 10,000 beds across the UK within the next nine years, up from the 1,800 currently on the books.

“There’s massive potential in the industry,” Adam says, pointing out that other cities have far more supply. “Private student accommodation providers didn’t exist on any scale five years ago. Big providers have all done big rebrands in the last two to three years; the sector is becoming more competitive.”

Previously filled predominantly by overseas students, the resident make-up is changing increasingly towards domestic students. “The appetites of students are changing,” Adam adds. “They want to be in the city centre, they want a flat with their friends. It’s an aspirational lifestyle.”

Posh student accommodation at Fusion Tower

“The student market didn’t diminish after the last recession,” agrees Jonathan Brecknell, director of Urban Creation who sees a steady demand for private sector accommodation; “there’s no dip in Bristol’s institutions. [In fact] course volume has risen by seven per cent.”

Increasing competition for Homes of Multiple Occupancy in the wider Bristol market, known to be under pressure, is forcing private lets into a comparable bracket, adding weight to the case for private halls. When faced with the choice between a damp house – “which aren’t typically well appointed” – and purpose-built accommodation for similar money, he too has found students opting for ensuites and flatscreen TVs.

The statistics seem to hold up. Bristol’s student population numbers more than 40,000. A Freedom of Information request to the Council could only provide hazy information about the relative amount of student accommodation, including properties under construction, but Bristol is bucking the national trend for declining student numbers.

“Student numbers have grown steadily since the cap on AAB students was lifted for 2012/13 entry,” says Dr Erik Lithander, pro vice-chancellor at the University of Bristol. “While the latest UCAS stats have shown applications are slightly down nationally, the University of Bristol remains a popular choice. Total student numbers for 2016/17 were 22,427 and our aspiration is to grow our student body by around three per cent for 2017/18 entry.”

Understandable for an institution in the middle of a £500m capital investment programme.

It’s a similar story at UWE, where applications for the 13,000 annual places are up 10 per cent this year, also against the backdrop of a £300m investment programme.

Though murmurs of concern sometimes rumble across the city, James Pullan, head of student property at Knight Frank, says the growth in purpose-built accommodation is no cause for alarm. Quite the reverse.

“Bristol is structurally undersupplied,” he says. “As is apparent from the figures, Bristol needed purpose-built accommodation. It didn’t have enough. If you look at the university projections, it still needs more. The market would not be saturated if another 4,000 beds came to market.”

That’s backed by rising investor confidence. In 2016, 60 per cent of all purpose-build acquisitions were made by portfolios, suggesting student blocks are viewed as a safe investment.

And Adam is adamant that’s true even if student figures waver: “The model is robust, even if numbers drop significantly.”

 

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