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Construction Delays Could Provide Needed Relief

Posted by Richard Ward

With the UK now in full lockdown, there remain many unanswered questions as to what both the short and long-term impact on the student accommodation market will be.

A key consideration will be the knock-on effect that construction delays could have on the delivery of newbuilds. Last year there was a substantial amount of negative press aimed towards those operators that were, for a wide range of reasons, unable to open schemes in time for the start of the new academic year.

Coronavirus will almost certainly lead to construction delays and whilst some developers may be able to overcome this, there is a chance some schemes may struggle to be built in time.

Of course, it is still unclear at this stage if the start of the 2020-21 academic year will be pushed back, which could provide developers and operators with the breathing space needed to complete their schemes on time.

However, such delays may become a blessing for existing operators trying to fill bed spaces in the most challenging markets.

For example, in Sheffield, StuRents' data highlights that more than 7,500 new purpose-built student accommodation (PBSA) beds were added to the market between 2017-2019, far outstripping estimated demand growth. Furthermore, not all this additional demand, which includes both domestic and international students, will wish to live in PBSA, or be able to afford the premium that it carries compared to Houses in Multiple Occupation (HMOs). With hundreds of additional beds already being advertised for the 2020-21 academic year, market fundamentals could deteriorate further, unless these schemes ultimately do not come to market in time.

Another example of supply growth outstripping demand growth is Cardiff, with more than 4,000 beds added during the three-year period, compared to fewer than 2,000 additional students who required accommodation. More positively, in markets such as Cardiff, planning application activity has come to a halt, providing a more optimistic long-term outlook for the city.

Conversely, there remain a number of locations where StuRents' estimates that growth in demand for beds has not been matched by new supply. For example, in Leicester, Nottingham and Bristol new PBSA supply has failed to keep up with new demand. However, this has led to a rush in planning application activity, so investors must consider supply and demand over the long run if they wish to avoid a similar scenario to that witnessed in Sheffield and Cardiff.

Figure 1: New PBSA Beds Added vs Est. Change in Bed Demand (2017-2019)

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Source: StuRents.com

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About StuRents:

- StuRents is one of the leading proptech partners in the UK student accommodation space

- StuRents operates StuRents.com, the largest student-centric accommodation search platform, listing over 750,000 bed spaces nationwide

- Beyond search, StuRents facilitates integrated online tenancy signing, tenancy payments and app-based tenancy management solutions

- This unique, vertically integrated end-to-end solution underpins StuRents' data insights and research capabilities