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UK student housing losing battle to residential developers

LONDON: London remains structurally short of student bedspaces as the battle for development sites is being won by residential developers. This was highlighted in the CB Richard Ellis (CBRE) UK Student Housing Marketview, which stated that there is a resurgence in the residential market.

CBRE attributed this phenomenon to the significantly higher end value for residential schemes as compared to student bedspaces.

Compared to residential values that range from £400 (RM2,160) to upwards of £2,000 per sq ft, student values are less elastic, ranging from £300 to £600 per sq ft.

Only 19% of students have access to a purpose-built bedspace compared with an average of 25% across the United Kingdom.

Currently there is a shortfall of about 17,000 bedspaces in London.

CBRE estimates that there are about 15,000 bedspaces committed for delivery in the next three years.

The report also stated that when the cap on student numbers is removed from 2015, it could mean a further 10,000 students in London. Development will need to be amplified in order to match the anticipated demand as well as the current undersupply development.

Another factor hindering new supply is the difference in Community Infrastructure Levy (CIL) levels between residential and student use. The CIL rate applied to residential use was a smaller percentage of the end value compared with the percentage applied to student housing.

The percentage applied to residential use is between 1% and 5% of value whereas for student use the percentage is between 3% and 13%.

Proposed changes to the London Plan presents further challenges for delivery of student bedspaces.

The first proposal was to provide more “affordable” student housing in the context of average student incomes and university rents. This is likely to suppress gross development value but it’s unclear how it will work in practice.

The second proposal is for further provision to be accessible, especially in regeneration areas away from Islington, Camden, Southwark and Tower Hamlets, where 57% of private halls have been built.

If these changes are implemented, taking into consideration all the other factors, it seems that student housing in London will become more decentralised.


This article first appeared in The Edge Financial Daily, on August 8, 2014.

 

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