CBRE: University towns in UK facing a shortage of PBSA beds

The UK’s main University towns are facing a shortage of over 350,000 beds as demand continues to outstrip supply, according to new research published yesterday by CBRE.

After analysing the latest supply and demand data across the 30 largest university towns, the global real estate advisor has concluded that there are significant shortages of PBSA beds across the UK and that they are expected to deepen in the next few years as demand will outweigh expected delivery of student accommodation.

Tim Pankhurst, Head of Student Accommodation Valuation, CBRE

The research found that in Greater London alone there is a supply gap of 106,000 beds, which has grown by 45% since 2017/18.

In Bristol just 2,900 beds have been delivered since 2018 but the need for purpose-built student accommodation has grown by 8,000 in that time frame.

In Glasgow 3,400 beds have been delivered since 2018, but the need has grown by over 13,000. Major markets including Nottingham, Manchester and Liverpool are also facing similar scenarios.

CBRE said understanding the nuances to each town’s market is essential due to the cyclical nature of the PBSA sector and how this impacts student accommodation development.

“Not all markets are experiencing chronic shortages right now,” said Tim Pankhurst, head of student accommodation valuation, CBRE. “Some are seeing more delivery than growth in terms of unmet demand, and some markets have sustained levels. As an example, Edinburgh has remained consistent in terms of its unmet demand levels despite delivery of PBSA, however we expect this to change as the planning environment is making delivery increasingly difficult.”

Nottingham has one of the larger development pipelines of beds but because delivery has been staggered, supply has not kept pace with the growth in demand. Brighton’s two higher education institutions are restricted from further student growth until more beds are available.

Oli Buckland, Head of PBSA Transactions, CBRE

“Regardless of where most markets are cyclically, there’s a clear lack of supply and demand that needs to be met urgently,” said Pankhurst, who predicts that “the total returns for all living sectors will be strong in 2023, and yields are less volatile than other sectors.”

Looking further at the investment market, CBRE’s analysis identified London and the UK’s super prime locations, such as Bath, Bristol and Manchester, to have a greater opportunity for rental growth, underpinned by long-term demand and supply fundamentals as well as stabilising operational costs. 

Investment transactions in the market are returning but almost exclusively off-market, according to CBRE, as equity sources come to grips with pricing and relative returns.

“The UK’s student population is the largest it’s ever been, and undergraduate applications are forecast to grow by 25% to one million by 2030,” said Oli Buckland, head of PBSA transactions, CBRE. “This gap we’re seeing between supply and need for PBSA highlights the mismatch between the pace of delivery and growth in the student population and the chronic need for accommodation. There will be a cost to investors who don’t act now as opportunities are scarce and demand is strong in both the rental and investor markets.”