The latest UK Student Accommodation Report from Cushman & Wakefield highlights a complex and fast-evolving landscape in the purpose-built student accommodation (PBSA) sector. While national demand for student beds continues to outpace supply, regional disparities and affordability pressures are reshaping market dynamics in significant ways. The report underscores a growing affordability gap that is causing underoccupancy in some key university cities, even as overall demand remains robust and the sector faces construction and economic challenges.

Cushman & Wakefield’s analysis reveals that, despite a national student-to-bed ratio (SBR) of more than two students per PBSA bed, some regions have seen a marked decline in demand. Sheffield stands out as a particularly notable example, where the demand pool for student accommodation is projected to fall by 17.3% between the 2022/23 and 2024/25 academic years. The city’s SBR has dropped from 1.46:1 to 1.21:1—a shift described as unprecedented in a major market—resulting in a 5.5% fall in PBSA rents, the largest decrease in the UK this year. Cushman & Wakefield cautions, however, that such shifts can be cyclical and may reverse over time. Other large markets, including Leeds, have experienced rapid supply growth outpacing demand, with Leeds seeing a 7.2% reduction in demand alongside a 21.3% increase in PBSA supply during the same period.

Affordability emerges as a central theme shaping these market outcomes. University accommodation rents grew by 4.44% last academic year, outstripping the rise in private sector rents, which increased by 1.16%. This marks only the third occasion in 12 years where lower-quality accommodation has seen faster rent inflation than more premium offerings. Data shows that schemes priced above 110% of the maximum student maintenance loan suffer lower occupancy levels, while those below 95% of this threshold enjoy better uptake. A striking 23% of PBSA beds across England—including London—are now priced above the maximum maintenance loan, restricting access for less financially resilient students. In some cities, only around 12% of students can currently afford accommodation within this threshold.

David Feeney, partner at Cushman & Wakefield, highlights wider demographic and behavioural shifts influencing demand as well. Postgraduate numbers have reportedly fallen by over 17% in the past two years, with international student numbers stabilising but still affected by earlier visa policy disruptions. Rising accommodation costs are driving a growing number of students to commute or live at home. Feeney notes that mid-market quality accommodation is increasingly competing for students factoring both lifestyle and value-for-money into their housing decisions, with higher-priced en-suite cluster offerings losing appeal if they breach affordability limits.

Construction costs and regulatory compliance under the Building Safety Act further strain the sector. Inflationary pressures have pushed development costs higher, leading to a decline in active PBSA projects. Currently, only 20% of the student housing pipeline is under construction, where viability demands an average rent of around £265 per week. This is reflected in subdued delivery figures: just 18,200 new student beds came online this year, yielding a net increase of 10,000 beds—significantly below historical averages. Over the past five years, UK PBSA supply growth slowed markedly, with 88,000 beds added compared to 158,000 in the preceding five-year period.

Yet despite these challenges, the overall structural undersupply still supports the investment case for the sector. Cushman & Wakefield projects that even a modest 1% annual growth in accommodation demand over the next five years would leave nearly 750,000 students without PBSA beds by 2030, sustaining an SBR of about 1.90:1. The UK remains a top destination globally for higher education, boasting four universities ranked in the global top 10, which bolsters long-term demand fundamentals.

Investor interest remains focused on a select group of viable markets. London, Nottingham, and Leeds accounted for almost half of all new bed deliveries this year, with Nottingham emerging as the UK’s second-largest PBSA market after London. Meanwhile, cities such as Bristol and Glasgow have seen little supply growth despite rising demand, intensifying local shortages. Leeds, while expanding its stock, faces challenges as new homes-to-rent schemes targeting students enter the market, increasing competition but lacking diversity in price and quality.

The broader market backdrop compounds these trends. Research from CBRE shows that major university towns across the UK face a PBSA bed shortage exceeding 350,000, with London alone seeing a 45% growth in its supply gap since 2017/18. Meanwhile, a decline in new planning applications and exit of buy-to-let landlords from the rental market, driven by legislative changes and rising costs, further constrains supply growth, as noted by analysts at StuRents. According to Grand View Research, the UK student accommodation market is projected to grow steadily, reaching over USD 1.38 billion by 2030 at a compound annual growth rate of 5.6%, reinforcing sustained demand and investment opportunities.

In summary, the UK PBSA sector remains a resilient and defensive asset class underpinned by long-term demand growth and structural supply constraints. However, the landscape is now more uneven, with affordability pressures and localized demand contractions reshaping market performance and development strategies. Providers and investors must navigate these complexities, balancing quality, cost, and location to meet evolving student expectations and financial realities.

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Source: Noah Wire Services