For many years, until recently, the student housing market was known for its cramped dorms that provided basic amenities for students. Over the last five years, however, the landscape of the market has rapidly evolved, reflecting a shift in students’ attitudes towards luxury and purpose-built accommodation. Construction Products Association economist Amandeep Bahra gives an overview of some of the major projects currently underway.
Not only is the student housing market adjusting to a new era of modern students, but it is also racing simply to compete with a rise in the number of students entering into higher education.
In 2015, the number of students accepted into universities and colleges reached record levels. This was largely a result of the government’s decision to lift the cap on student numbers, which came into effect from September 2015. The implications of this action, however, are not short-lived. Student numbers are expected to rise over the coming years with the latest UCAS figures already pointing to this. There were 593,720 applications registered by the January deadline for 2016, an increase of 0.2 per cent compared to a year ago. While the bulk of applications were represented by domestic students, EU applicants accounted for approximately 8 per cent of total applications and the number of EU applicants increased by 6 per cent compared to the previous year, which registered 45,220.
Regional university projects
Reflecting this higher level of demand, privately financed education construction output – which includes schools and universities work – was worth £3.9 billion in 2015, a 5.4 per cent increase compared to the previous year and the highest level on record. While we are used to seeing key construction activity skewed towards London, this isn’t the case for higher education, which welcomed a wave of new university transformation projects across regional markets over 2015. All of these shared a similar vision: to provide students with a ‘luxury’ experience.
The new breed of student accommodation includes studio flats and high quality en-suite rooms – also known as student ‘pods’ – that come with high-specification kitchens, typically finished with solid surface worktops and a dishwasher, in addition to a flat-screen TV, high-speed broadband and a double bed. Beyond this, on-site gyms and entertainment rooms are increasingly becoming the norm.
The largest projects in the pipeline are two £1 billion ten-year investment plans at the University of Cambridge and the University of Manchester. The latter includes a £175 million redevelopment of Owen’s Park in Fallowfield, Manchester, which will see 3,000 new, modern, high-quality student units forming part of the latter campus masterplan by replacing existing properties. Construction work is expected to take place between June 2016 and June 2021.
Despite these major projects, the spotlight remains on Coventry, which is bustling with construction on multiple student accommodation projects. These include a new £73 million Bishopgate development that will provide 1,200 student rooms, and a £50 million mixed-use scheme at Belgrade Plaza, which will deliver 600 student accommodation spaces through a blend of high-quality studio rooms and cluster flats. Similar developments are also seen elsewhere within the city such as Allied Carpets, Lower Ford Street and London Road.
Furthermore, in the Midlands, Newman University has invested £22 million to expand its campus over the next five years in Birmingham. The scheme aims to deliver three new halls of residence, housing approximately 300 student bedrooms, whilst existing buildings will be refurbished to modern standards. The University of Northampton, the University of Liverpool and Glasgow University are also among the herd racing to expand their student housing stock. While the list of projects outside of the capital is non-exhaustive, a similar picture is also painted in the south, particularly in London, which has recently seen University College London (UCL) borrow the largest loan in British university history worth £280 million from the European Investment Bank (EIB) to fund a new UCL East campus at the Queen Elizabeth Olympic Park in Stratford. Again, this programme will see construction of new student housing.
Counting the cost for students
It may come as good news that universities are becoming more mindful of changing students’ tastes and preferences, but is this coming at a higher cost for students? According to the NUS/Unipol Costs Survey for 2015, the average weekly rent for purpose-built student accommodation was £146.73 in 2015/16, £6.24 higher than in 2014/15 and, given the new stream of luxury student accommodation, this will undoubtedly push rents up further, going forward.
There is a perception that all these new modern developments are targeted towards more affluent students, particularly foreign students. This wouldn’t come as a surprise, though, as international students pay more than double in tuition fees compared to home students and, as a result, are more likely to dictate activity in the student housing market.
With the shift towards the high-end market expected to continue for the foreseeable future, are we likely to see affordable options erode? Will more and more students be priced out?
Despite these concerns, the CPA expects construction in the privately financed education sector to grow 6.0 per cent this year, followed by growth of 5.0 per cent in 2017, reflecting the healthy project pipeline.