Insights
Outlook for the PBSA sector
A lot of noise has been made about the PBSA market facing a tough time over the next few years, but if this was the reality why are new operators still entering the sector and planning five-year development pipelines?
The sector has certainly had its challenges over the last two years, with refunds, rental periods and overseas student numbers all having an impact, but current operators are still planning new developments and reviewing existing stock, whilst investors remain keen to enter the market. Established operators are demonstrating flexibility to counter some of the challenges and new entrants to the sector are proving innovative in their attempt to attract a different student demographic.
New PBSA construction did slow and even stop in some cases over the last two years, however with the right management and processes, construction work has been able to continue and be completed successfully to programme, ready for mobilisation and student intake at the start of the academic year. Ultimately this is the key with any PBSA development.
With the right delivery model in place and the right market offer, there is a healthy outlook for PBSA. Based on what operators and developers in the market are both saying and doing, there will continue to be development opportunities with strong investment. Changing student numbers will cause a reflection on development criteria, however the overall winners will be those who innovate and ultimately provide accommodation which the next generation wants, both at university and also post-graduation.
Value for money is always a key driver for students, so new and existing operators of PBSA will focus on quality and product within the constraints of viability. With student wellbeing a key consideration now, communal areas and social space will not only be more important than ever for the user experience but also be a critical differentiator in a competitive marketplace.
For most universities investment in student accommodation has always been a poor relation to development of new teaching and learning facilities, however I think this will change. Historically first year students have been in PBSA, with second and third-year students seeking alternative accommodation. Given the current climate, PBSA will become a more attractive option for second and third-year students, as well as a potential growth market targeted at post-graduate students.
There is a strong opportunity for a new product targeted at this demographic given that PBSA will be a more attractive option than HMOs, taking account of factors such as cleaning, welfare and well-being support, communal facilities, etc which are best provided by operators in the market. This, coupled with a move to online teaching by universities and student bubbles, also presents a new opportunity for integration of technology. Operators will therefore be able to sell a product and brand to older students and postgraduates which could ultimately lead to an entry into a new PRS or co-living model over the next five years.
Market conditions will also play a role over the next 12 months with programme and cost impacts of labour and materials requiring careful management. This, mixed with a continued drive for cost savings and programme efficiencies, will drive a deeper understanding of materials, logistics, programming and use of modern methods of construction. Procurement will also shift with a focus on open book and cost led procurement routes instead of the traditional forms.
With the right delivery model in place and the right market offer, there is a healthy outlook for PBSA currently – and the economic impact of students and graduates on a local city economy is well understood and needed now more than ever.
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