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Have we reached saturation point?

By David Campbell, managing director of Alumno Developments

Posted by Rebecca Paddick | March 11, 2017 | Students

The notion that key university towns are reaching "saturation point" with student homes, is becoming something of a recurrent issue in the regional press. However, according to research conducted by Student rentals platform, Studenttenant.com, demand for student accommodation is exceeding availability. David Campbell of Alumno dispels the growing mythology surrounding developing student accommodation and looks at the facts. 

The Financial Times recently reported that the past two years has seen record investments into purpose-built student accommodation, meanwhile, consultancy firm EY has proposed that approximately nine university towns have reached or are nearing “saturation point”. It seems that not a week goes by when some large international investment company hasn’t committed millions of pounds in a UK portfolio of student housing. Equally there have been a good number of regional news stories quoting local residents’ unease at yet another student housing development in their neighbourhood.

So is this assessment of oversaturation fair?

One Cardiff newspaper recently cited such warnings from a ‘property-based developer’, but went on to quote another who said that they hadn’t seen any let up in demand for student accommodation. The article also made the point that in certain areas of Cardiff, former student homes are being converted back into homes for young professionals – a consequence that we’re starting to see nationwide.  

In the past month Student.com (the world’s leading marketplace for overseas student accommodation) released data that showed the UK continues to be an attractive destination for European students, despite the threat of Brexit. This combined with research conducted by student rentals platform, Studenttenant.com, showing that demand for student accommodation is exceeding availability, would suggest that we are yet to hit a wall with student housing. 

Certainly from the students’ perspective there is a lot to be gained from living in managed student buildings. They are able, in the majority of cases, to secure a below market all-inclusive rent for a long-term period. The homes are better regulated and more secure than what was on offer in previous years. There is also a transparency and a dependability that arguably didn’t exist previously between student and landlord. 

Certainly from the students’ perspective there is a lot to be gained from living in managed student buildings

Additionally, with the change in taxation laws and planning consent for multi-letting, many traditional landlords are being turned off from student lettings. It is a definite shift away from students being densely packed into terraced homes and the days of typical ‘student digs’ and overcrowding could finally be over.

Towns reaching “saturation point” in my view could indeed be a valid assertion in certain locations. For example Glasgow and Liverpool have had a significant increase in Performance-Based Service Acquisition (PBSA) within a very short time frame and the market now needs time to settle.  It’s inevitable, as with any sector, that after the initial flurry to fill a gap in the market, there is a danger of having too much of the same thing. The true appeal of purpose-built student housing has always focussed on the choice and options it can offer students.   

Then again, some cities are still carrying  “voids” in the rental market; they’re not getting to the stage where their traditional housing has been taken up by students, while other cities are effectively creating “student ghettos”. It is an ever-evolving process and one that changes with the needs of the students, which will undoubtedly be different again in a few years time.

It is fair to say that development for student housing is in a far better place than it was 12 months ago, which was again better than it was 12 months before that. However, we’re currently in a position where there are areas that have a big demand for dedicated, multi-faceted student housing, and other areas where they have potentially reached capacity.

It is in part, down to local governments to strike the balance. A lot of these historic student accommodation schemes have been a question of trial and error. Now we’re considering what the design of the buildings needs to do and how it has to integrate with its surroundings. Students are largely being seen as a powerful contributor to local communities, leading what there is to offer and effectively driving the agenda – think Shoreditch’s huge makeover in recent years. This wasn’t purely down to bankers, the vibrancy and cultural interest was in large part thanks to the students who moved in there.

Equally, universities need to provide a joined-up and cohesive message to support the offer that the private sector can bring by enhancing the infrastructure and environment the students seek when making the choice of where to study.

Multi-functional buildings will increasingly become the norm, with developers looking to blend residential, academic/teaching and community areas within the same building. Student facilities will need to become increasingly adaptable, so they can be used and enjoyed by the wider community and thus ensuring they become a key contributor to the success of towns and cities in the process of reinvention. Coventry is a good recent example of this.         

One fact remains very clear across this sector – the standards have risen and the benchmark set high, and with this expectations are changing. The challenge is as much about meeting the needs and expectations of the student population as it is about adding value to the wider local community. 

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