University cities are running out of student digs

Many of Britain’s leading university cities are running out of accommodation for students, according to a report by a leading property consultant.

Demand far outstrips supply in many cities, says CB Richard Ellis.

The report cites students are clamouring to study at popular universities and colleges – like the Russell Group Universities, in London, Edinburgh and Bath, but they have a lack of choice for halls – and this is likely to remain as older cities lack the space for expanding accommodation.

Other obstacles for developers include:

• Planning controls – particularly for larger halls
• Off campus developments could have to factor in additional costs, like road improvements and affordable housing that might undermine the viability of a project, especially in areas where land costs are high.

Returns from student letting have outstripped other property sectors over the past five years – although growth is slowing down.

On average, rents went up 6.6% to £98.99 per week between 2008/09 and 2009/10.

Rental growth expected to track inflation

The report explained that student hall development faced challenges from government spending cuts and increasing costs of studying – but also pointed out that a fall off of numbers here could be more than set off against increasing numbers of students from overseas seeking places in the UK.

Jennet Siebrits, head of residential research at CB Richard Ellis said: “It is unlikely that the rapid growth we have seen at the top end of the market will continue, as many private providers have cut their prices this academic year in order to remain competitive and keep occupancy rates high. We expect rental growth to remain steady and in line with inflation, with stronger prospects in the mid-market due to the heightened demand for cheaper accommodation.

“Cuts to higher education funding will force universities to divert finance away from estates towards teaching and research. Many universities would therefore welcome private initiatives to improve their student housing stock and ensure the institution is attractive to both domestic and international students.

“Developers therefore need to work closely with universities to deliver the right accommodation to meet their students’ needs. They should look to provide a variety of price points within a scheme to hedge against the rising cost of education and ensure high occupancy.

“While opportunities clearly exist in the current market, developers will need to understand the supply and demand intricacies of each individual locality, and demonstrate the social and economic benefits of each scheme to local area.”

Download the full report

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