The Governments recent decision to close University campuses has been widely publicised over the past month. Many students live away from home during their term time in either University owned or privately rented accommodation.
The closure of University campuses has forced many students to leave their halls of residence and return home or not return after the Christmas break. For most, this meant leaving their accommodation before their letting contracts expired.
Most university-owned halls of residence and privately owned, purpose-built student accommodation (PBSA) providers have allowed students to terminate contracts early without any charges. Some have even waived or reduced rent for all students, regardless of whether they are still in their accommodation.
However, those living in private rentals face negotiating rent reductions or agreeing early releases with their landlords. Landlords are under no obligation to do this, which has left some students in a difficult position, especially those who are reconsidering living in shared housing due to health concerns.
How has the pandemic affected student numbers?
At the start of the pandemic, it was originally feared Universities would face a serious financial disaster. The Institute of Financial Studies (IFS) projected losses of £3bn to £19bn in 2020 – 2021, due to a drop in the number of students enrolling.
Experts believed that the ongoing travel restrictions would result in a collapse of high, fee-earning international student numbers. The IFS’s predicted a 50% fall in new international students and assumed that the total enrolments from UK students would be 10% lower.
However, in reality 2020 / 2021 had a record year of undergraduate applications for both UK and international students compared to previous years (UCAS, 2020). Even the number of deferrals was very low, accounting for only 5.8% of applications.
Has the demand for student accommodation changed?
Despite student numbers remaining unaffected by the pandemic, travel restrictions and the recent closure of University campuses has significantly impacted accommodation providers. Some sources even predict that smaller, independent student accommodation providers could go bust in 2021.
Occupancy rates across the sector during the semester of 20/21 academic year have dropped dramatically. The three largest listed UK PBSA providers, Unite Group PLC, Empiric Student Property PLC and GCP Student Living PLC, reported occupancy of 88%, 70% and 69% respectively.
Accommodation providers have been hit particularly hard by the number of international students who have chosen not to come to the UK for 2020 / 2021 due to the pandemic. Bookings data showed a 29% fall in the number of international students booking accommodation in October 2020 (Student.com and Bonard).
Considering, international students make up 20% of the total student population, they account for a sizable proportion of demand.
2021 is predicted to be a good year for the student accommodation sector
International students are more likely than domestic students to live in PBSA. Given the rise in international students enrolling at University, we can expect to see ever more demand for PBSA.
Although some sources predict a turbulent year for 2021, the sector is not expected to see in any significant signs of distress.
Investment in PBSA has grown dramatically over the past two years and appears to remain unaffected by the current climate. Whilst the pandemic has paused some of the planned construction and refurbishment works, it is expected that projects will resume late 2021, early 2022.
Take advantage of the opportunities ahead!
According to Bunk and Savills, the student accommodation sector will remain robust. Investor interest in UK student accommodation has remained strong despite the growing concerns of demand.
In fact, 4 out of 5 students reported they would still rather live at campus than at home even though their University experience was different to how they imagined (Bunk).
This is positive news for PBSA and suggests that 2021 / 2022 could see substantial improvements in revenue.
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If you are PBSA provider and your property is now vacant, it could be advantageous to undertake your refurbishment works now. Get your buildings ready before students return and construction projects restart.
