The rise and rise of Purpose Built Student Accommodation

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  • The rise and rise of Purpose Built Student Accommodation
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Stephen Spiller

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Stephen Spiller

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The ‘Purpose Built Student Accommodation’ (PBSA) market is often referred to by industry commentators as the ‘golden goose’ of the residential investment sector. Confidence seems to have returned to the sector which has carried on delivering during the tumultuous time of the pandemic. It has matured as an asset class, investors remain confident and occupancy and rent collection have returned to historic levels. In fact, 2021 is turning out to be a record-breaking year for investment with a large number of new investors entering the market and ground-breaking schemes underway. 

At RLB we are working with developers on several innovative PBSA schemes across the UK and there are certainly some key factors which we think should be considered when looking at the sector.

Student numbers on the up and up

The data behind the student accommodation market, despite the pandemic, remains robust. Student numbers are rising year on year with a record cohort of 18 year olds in the UK starting full time higher education in 2021. The number of international students, who are particularly drawn to purpose-built accommodation has also grown. Arriving in a new country, PBSA offers security and a known quantity and quality for these students, and they are more willing and able to pay for this style of accommodation. There is no reason to believe that this trend won’t continue as the higher education sector in the UK retains its high-ranking position globally. And as student numbers continue to outstrip the beds available – there is still room for growth.

Quality vs Value

However, we all know that the student experience is critical, and accommodation plays a key role in this. Students are picky and vocal plus expectations grow year on year as to what facilities should be available, the quality and the cost.  Covid-19 is definitely adding to this mix with the desire for en-suite bathrooms, super-fast broadband for online learning and smaller numbers sharing communal facilities – so the wish list is growing all the time. 

The developers of PBSA with strong brand names are those in a good position who have come to the forefront during the pandemic. Students know what they are getting, and in a market characterised by choice the sector does in general provide greater value and higher quality. 

Mitigating against increasing costs

But there is no doubt that next year will be an interesting one. We will see the double whammy of higher inflation impacting operating costs which will result in increased rents and increased build costs which in turn will put pressure on rental levels and investment pricing.

This is where maximising design efficiencies right from the start of a scheme can have a massive impact and mitigate against these increases. For example, from looking at offsite manufacture opportunities from kitchen and bathroom pods to furniture assemble and M&E ductwork, we can significantly reduce programme times and risk. 

Sustainability at the core

The sustainability of every scheme is also a critical element for all stakeholders from investors to students to the communities where they are being built. The recent COP26 Summit has rightly accelerated the importance of acting now to make a difference. It is good to see that in the schemes we are supporting BREEAM requirements are helping meet carbon reduction targets and even PassivHaus is getting more popular.

An emphasis both on placemaking and the social value brought to the communities that the scheme sits within, are also approaches that we are advocating and it is really good to see this growing year on year. With local authority planning committees rightly scrutinising the long-term benefits that PBSA schemes can bring to a region, addressing these issues at the start of the project is crucial.