student accomodation Archives

What the future holds for student accommodation

PBSA OR HMO?

According to research conducted by StuRents Limited, a leading service provider for the UK student accommodation sector, historically there has been an impression that a shortage of Purpose-Built Student Accommodation (PBSA) represents a shortage of accommodation as a whole, when in fact 80% of British students executing their contracts via Concurrent, actually chose to live in HMO (House in Multiple Occupation) accommodation.

By nature of design, HMO are more affordable to build and for students to rent, as these tend to be typically converted houses or flats shared by multiple students. However, HMO tend to have limited amenities. In contrast, PBSA are specifically designed with student life in mind, and with a variety of communal spaces for studying and socialising, which offer an altogether more attractive student experience. PBSA are often managed by specialised Student Housing Companies, rather than Private Landlords, thus making this a more expensive option for students.

The reason for a substantial proportion opting for HMO is therefore largely down to cost and affordability, with PBSA often seen to be significantly more expensive.

The research also indicates that in contrast, Chinese students still have a significant skew towards PBSA and the prediction is that numbers of Chinese students are expected to further increase in the UK, due to Trump and other countries placing restrictions on Chinese students, which will have a knock-on effect on the UK rental market.

The impact of affordability

The financial squeeze is making the costs of PBSA accommodation increasingly unaffordable for many, but particularly domestic students. Nobody can argue that the PBSA sector has done much to provide more accommodation for students, whilst also significantly raising their living standards in the process, but there is a growing need for more budget friendly PBSA accommodation. As shared in the StuRents report, “The sector faces a huge challenge in delivering additional stock across the price curve rather than just at the higher end. At the more expensive end of the spectrum, the reliance on the Chinese market is significant. More than 65% of Chinese students were signing contracts at £200pppw or more, whilst for British students this figure stood at just 19%.”

To make delivering more budget friendly PBSA financially viable for developers, options to scale back on ancillary facilities such as gyms and cinema rooms will help save costs, which can be passed to students and won’t impact on living standards, especially when considering how may high street gyms are now popping up near to universities for example.

Location location location

Research shows that London remains the location with the highest number of university place acceptances, and these have also grown in the West Midlands area. When it comes to ascertaining supply and demand, research is paramount to accurately calculate where there is an under supply, and hence where opportunities exist for development. Recent Office for Students data shows that overseas student numbers are rising in cities such as Birmingham and Bristol, but declining in Leeds and Sheffield, and that in the past year, 40k beds have been submitted for development nationally. Most of these are concentrated in major cities, with London leading, followed by Glasgow.

The effect of the Renter’s Rights Bill

If an HMO has five or more unrelated occupants, it’s considered a “large HMO” and therefore requires a license from the local authority. However, new laws such as the Renters’ Rights Bill, expected to come into effect in the summer of 2025 could lead to the biggest regulatory shake-up in recent memory for the HMO market. This is because, while it will spell the end of the fixed term contract and offer greater rental flexibility, HMOs also face having to get their accommodation up to EPC B as part of new regulations, and the cost to some of doing this will make it unviable for them to continue to rent the accommodation. This could also easily lead to a reduction in supply and an increase in rents, which would be detrimental to British students, as they make up the largest proportion of this market.

The impact of BTR

BTR can offer students a compelling alternative to both PBSA and HMO for numerous reasons. For starters there is the advantage of location, as may BTR properties are central, close to universities and near to amenities such as shops and gyms. Being newly constructed, and offering flexible contract lengths and occupancy start dates, makes BTR an often more attractive and viable housing choice for students who are seeking value and quality. Also, with PBSA creeping up in price, there is less of a differentiation between PBSA and BTR financially. Currently, anecdotal evidence indicates that student occupancy in existing BTR is steadily gaining traction.

The right marketing strategy

Nicole Eve, who heads up the rental sector at Focus Agency Group, including PBSA, also highlights the importance of marketing in a successful PBSA asset: “Creating and implementing a marketing strategy that is based on strong insights of target audiences for the development is fundamental. This includes creating the right brand for the asset to appeal to students and their parents, the media and organic channels it appears on to position the asset front and centre at the key decision-making times, as well as the key messaging needed for the wide variety of platforms, to engage and build an affinity with potential residents.”

The opportunities

Outside of London, it looks as though demand for PBSA will grow faster than supply. As the report states, “Taking into account core PBSA demand, and adjusting this to factor in a proportion of the returning domestic market and regional cities could require a further 250k beds by 2028. Including London, this figure balloons to 330k, highlighting the significant shortage in the capital.”

Aside from new build, there are plenty of opportunities to transform redundant office blocks and commercial spaces into student accommodation, which is something we have considerable experience in delivering. Office blocks lend themselves to this cause for several reasons, with a prime benefit being that so many are open plan. Partition walls can easily divide vast spaces into new living areas. Structurally, large open office spaces tend to be solidly constructed and surround a central service core containing lifts, plumbing, ducts and risers, fire stairs, bathrooms and equipment. Wet areas located against the core can easily be connected to the building services and systems.

There is no doubt that there is still a strong case for investment and opportunities because despite a wave of new developments, there remains an enormous supply-demand imbalance. People are shown to be more likely to opt to attend university during a downturn, which drives demand but in turn they also seek a better rental deal, where quality of accommodation is also paramount.

Factors such as a reduction in HMO accommodation due the Renters Rights Bill and the encroachment of BTR as an increasingly popular alternative, means that developers need to carefully consider creating a variety of PBSA options, and not just high-end, to meet the growing demand for student housing and to harvest the opportunities to be had. This is where the true prospects lie and where the financial rewards can be made.

What will 2021 and beyond hold for Architects?

A RIBA statement in October last year, revealed that over £3.5 billion of work was scrapped, with a further £7.5 billion on hold. There is no doubt that times are tough and as a result, competition is fierce, which is bringing about a “race to the bottom” on price. It is up to the industry to retain consistency and standards without compromising on quality, which occurs when costs and corners are cut.

For architects involved in retail, there are additional challenges due to the pandemic escalating the popularity for online shopping. The customer journey is changing, and we need to respond to this across both the retail and hospitality sectors, by looking into placemaking and taking a multi-faceted approach. The role of designers should be transforming experiences and collaborating in a more community-driven environment. There are going to be opportunities for architects as spaces need to be repurposed to adapt to the rapidly changing market and make them work differently.

Post pandemic, making people feel safe is going to be an important criteria in how space is utilised. Airport lounges for example will increase in numbers and popularity, as people feel safer in less crowded spaces and will be prepared to pay for this premium.

The pandemic has highlighted the opportunity to be innovative. We will start to see the regeneration of town centres, with vacant office and retail units making way for more placemaking facilities, with spaces for people to live, work and play.

What of rural areas? There is concern over the impact that Brexit has had on these communities, which have seen funding all but disappear. Rural estates need to be optimised to work a little harder, and to look into opportunities for change of use, such as including holiday accommodation, conference, leisure and lifestyle facilities.

And what of London and the larger cities? Interestingly, certain sectors respond more slowly to change, and what is referred to as “critical impact” can take up to three years. What we will start to see more of is changes to the profiles of buildings and some environmental changes, with more and more green spaces.

Overall, there is optimism about the residential sector. The large government debt will see the need for more jobs to be created, to generate taxes to help the economy recover. This will result in more employment in the construction industry. Advancements in construction methods will be explored more than ever, prioritising the use of off-site modern methods of construction (MMC) to deliver homes at a faster pace than traditional methods. Schools can also take advantage of this form of construction to speed up the shortfall.

However, off-site needs to think very carefully about the environment and sustainability, for what is basically moving boxes of air over vast distances. A way round this is to source things as locally as possible.

There is no doubt that sustainability is going to be increasingly important regardless of sector. With government targets set to achieve net zero carbon by 2050, advancements in technology can support this initiative by utilising collaborative tools such as BIM level 2, which gives an accurate picture of initial costs and whole life costs, encouraging clients to implement sustainable solutions upfront. BREEAM (Building Research Establishment Environmental Assessment Method) will become an increasingly important factor in architecture, being the world’s leading sustainability assessment method for master planning projects, infrastructure and buildings.

In conclusion, there are certainly going to be challenges, but also opportunities that arise from the shifting needs for buildings and spaces and how we will use them.

educational environments: 5 key drivers of change

“Form follows function” a principle associated with 20th-century architecture, denotes that the shape of a building should relate to its intended function. Problems arise when the function no longer fits the form for which it was intended. Previous teaching methods involved a teacher needing to be seen and heard, demonstrating what was being taught via a two dimensional surface. The best way to accommodate this was rows of desks in a rectangular room, all facing the front. However, numerous factors have influenced and changed the way we teach and learn; and trying to squeeze these into traditional teaching spaces is like forcing a square peg into a round hole…

the future of student accommodation

Overseas students currently represent 1 in 5 of the student body in the UK and have been prepared to pay more than £160 per week for accommodation where concierge services, private gyms, pools and cinemas are considered standard. Post BREXIT, has seen the numbers of foreign students falling, with 41,000 fewer wanting to study in the UK this year. Developers face the prospect of empty accommodation or slashing rental fees.

Future projects will have to adapt to a rapidly changing market. The challenges differ across the regions. Like other areas, London still suffers from fundamental levels of undersupply, with The London Plan suggesting a need for up-to 31,000 additional bedspaces by 2025. In the capital, development has been impacted significantly by high land costs and competition from other uses forcing developers to acquire secondary stock to recycle, rather than build from scratch.

rpa:group have long been involved in repurposing buildings such as redundant office blocks, as well as refurbishing existing student accommodation schemes in response to the demand for elevated student living. We are now involved in addressing a more affordable future where cluster flats of 2 bedrooms and more are proving popular, creating a communal living opportunity rather than isolated studio “boxes” and breakout spaces that reflect the needs of modern students, such as raised seating and work stations with multiple power supplies to support their technology.

As the Huffington Post recently pointed out, when they surveyed students’ expectations; “ students just want good wifi, a large bedroom and a double bed. Even a dishwasher and a tumble dryer could not crack the top 5 student accommodation desires let alone the desire to have a porter service, a gym and a nightclub on the ground floor. ”

Clearly, higher end design will still have a place in some parts of the country but going forward, a more streamlined version also needs to be considered.

If you would like our help with your next student accommodation project, please contact us on 01784 256 579 or send an email to s.cuff@therpagroup.com