Commercial Real Estate Partners, Ronan Ledwidge and Anthony Goodmaker, were back at this year's Student Housing Conference - an in-person event held at the Grand Connaught Rooms on Wednesday 11 May, which brought together all the biggest names in the UK student accommodation market.
The last few years have taught us that the sector has a proven, resilient track record and that purpose-built student accommodation (PBSA) is now considered a mainstream asset class: it's no longer viewed as "alternative" but as a key investment opportunity by many prominent UK investment funds, whilst also attracting significant interest from the international investment community.
But what are the main talking points for 2022 and beyond?
- Lack of Supply - the limited availability of operational stock is the main issue for the investment market, pushing investors into the development funding world as they are forced to take on greater risk to secure their chosen assets. The problem is exacerbated further in key locations where it is notoriously difficult to get planning permission for new PBSA schemes.
- Rising Costs - by no means unique to the PBSA market, but a perfect storm is likely to increase price pressure in this sector. Land prices continue to rise due to lack of supply, in spite of increasing build costs. Add to that the general cost of living crisis, with focus on the price of utilities and whether those will be passed on to PBSA's end users and you are left wondering quite what the budgetary constraints of tomorrow's students will look like in the face of these rising costs and how that will impact the market.
- Sustainability - ESG credentials have long been spoken about in the student sector, and with good reason. Perhaps no other sector can count its end users - the students - as being so intrinsically engaged and sensitised by the climate crisis and general green agenda. Not only do they demand action, they expect it. But whilst there is concern that implementing these requirements comes at a cost, the data suggests that location remains, above all others, the number one determining factor when it comes to students choosing their accommodation. Will we see this change as the ESG requirements of tomorrow's students become more and more important?
Despite these challenges, the outlook remains overwhelmingly positive. Investment in PBSA will continue to grow as funds, both domestic and overseas, look to place further capital in this sector. And even the local authorities are starting to adjust to the growing demand for new, high-quality student accommodation in key locations - Bristol City Council has recently announced new policy to facilitate the development of PBSA and other shared living accommodation in the city. If other sought-after localities can follow suit, perhaps we will see more supply, quicker than we otherwise might have expected.
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