UK student accommodation rents rebound in 2022
A return to strong rental growth following the pandemic, but big variations can be seen across markets.
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Headline rental growth for purpose-built student accommodation increased by 2.6% for the 2021/22 academic year, according to Knight Frank’s Student Property Index.
The index is a comprehensive study of PBSA rents in the UK, analysing year-on-year growth across 50 cities on a room-by room basis. But whilst the macro picture shows steady rental growth, individual markets are seeing varying levels of performance, largely dependent on supply and demand dynamics within cities.
Locations with large, growing student populations and modest delivery pipelines, such as Glasgow and Bristol, are outperforming the wider market in terms of rental growth. Cities with a large volume of existing PBSA stock, as well as healthy development pipelines, such as Sheffield, are reporting more modest growth.
Yet, while markets have experienced different degrees of new supply relative to demand over the last year, it is worth noting that the change in rental values across the sector has been positive in 98% of the cities covered by the index up from 82% in 2021, and that occupancy rates in PBSA remain high. As the balance between demand and supply widens, we anticipate that rental growth in the sector could exceed 5% in 2023.
Steady rental growth for PBSA compares with current double-digit annual increases in the wider private rental market with strong demand for rental accommodation outweighing dwindling supply. This has narrowed the gap between the cost of PBSA relative to renting on the private market.
Indeed, an unanticipated positive stemming from the cost-of-living crisis has been a change in student sentiment toward PBSA versus that of the private rented sector, with more students opting for the fixed cost model of professionally managed PBSA as they seek to maximize value for money. That’s because PBSA rents are often inclusive of utilities and Wi-Fi, as well as additional on-site amenities. Our analysis shows that when additional costs including energy bills, insurance and Wi-Fi are included, PBSA offers a more cost-effective option for students compared with the PRS in 80% of the largest university towns and cities.
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