Tag Archives: construction

Why is the PBSA Market So Resilient?

There has been a meteoric rise in demand for Higher Education in the United Kingdom, which has in turn created a rise in the development of student accommodation. Up until recently, universities provided their own student accommodation, however, these institutions are struggling to keep up with the increasingly high demand, and are therefore having to turn to the private sector.

In the UK alone, the Purpose Built Student Accommodation (PBSA) market saw a total investment of £7.2 billion, up 69% year – on year, and notably higher than the long-term average of £4.1billion over the previous five years (Knight Frank, 2023).

Below are some additional key facts regarding the Purpose Built Student Accommodation Market (Knight Frank, 2023):

•  263,000 forecast of additional full-time undergraduates between now and 2030

•  95,000 estimated number of new bed spaces in the planning pipeline

•  6% average rental growth in 2021/22

There are a number of reasons why PBSA has flourished, firstly, demand has escalated from 50,000 undergraduate students in 1970, to 350,000 in 2011 (Comaware, 2019). Universities now enter into nomination agreements with the PBSA providers, whereby they reserve a certain number of beds for their students guaranteeing a minimum rental income. This brings with it a level of financial burden on the universities, in turn creating an incentive for them to promote that accommodation, ensuring maximum bed occupancy, providing yet another advantage for PBSA providers. Secondly, PBSA has developed major financial backing from large, highly experienced capitalised parties, including Singapore’s sovereign wealth fund (Savills, 2019). Thirdly, when tuition fees were raised in 2012, families were more willing to pay for accommodation, as it did not seem so expensive compared to the high tuition fees. Lastly, one of the major reasons why PBSA has been so successful, is the security of rental income, with students paying steady rental payments from September through to July.

However with the possible risk of oversaturation in certain cities looming, do developers now need to work out, what the next step is in order to maintain this momentum? There have been ideas such as re-branding co-existing buildings and possibly investigating the concept of co-hybridisation models.

The PBSA market is forecast to have another strong year in 2023. In CBRE’s most recent PBSA report they wrote “Historically, recessions have resulted in additional demand for higher education. International student numbers will also continue to grow, building on a record volume in 2022.” They go on to explain this is due to the incredibly strong reputation the United Kingdom has for Higher Education. Demand will further be driven by the weakening of the pound, making studying in the UK more attractive.

CBRE have stated “because of increased taxation and further regulation, the supply of Houses in Multiple Occupation for students is falling, which will boost demand for purpose-built accommodation.” All of this, including record high occupancy levels means the fundamentals according to CBRE have “never been better” and the prospect of high total returns led by strong rental growth, will continue to drive the PBSA investment in 2023 (CBRE,2023).

  1. Knight Frank Student Property Report 2023

Available at: https://www.knightfrank.com/research/report-library/uk-student-housing-2023-9846.aspx

  1. Comaware (2019) The Growth of the Purpose Built Student Accommodation Sector

Available at: https://comaware.net/2019/02/10/top-dollar-digs-the-growth-of-thepurpose-built-student-accommodation-sector/

  1. Savills (2019) Global Student Housing Investment Global student housing investment

Available at: http://pdf.euro.savills.co.uk/global-research/global-studenthousing-investment-2019.pdf

  1. CBRE UK Real Estate Market Outlook 2023

Available at: https://www.cbre.com/insights/books/uk-real-estate-market-outlook-2023/student-accommodation

2022 Away Day

We celebrated a successful, busy and hard working year at our Company Away Day in the Cotswolds last week!

The day began with updates from our Directors and Company Executive Groups on our year-to-date performance and plans for 2023 and beyond. To cap off an exciting day, there were games and, of course, a party! It was great to see everyone from the London and Manchester offices together.

We look to carry on with the same momentum, energy and passion into 2023 and are prepared for what 2023 has to bring!

 

Material Shortages and Sustainable Solutions

The material shortages in the construction industry continue to worsen and according to the Office for National Statics (ONS), in July 2021 the cost of materials rose by 20%. This caused a decline in monthly construction output by 1.6% in July compared with June, falling to £13,660 million, and follows the 1.3% monthly decline in June 2021. The situation is likely to remain a problem for 6 to 9 more months, at least till the end of 2021, as the knock-on effects from Covid and Brexit remain evident.

 

Timber, roof tiles and cement heads are few of the list of materials in short supply while the demand is steeply increasing. From a wider perspective, the world’s consumption of raw materials is set to nearly double by 2060 as the global economy expands and living standards rise, which will cause twice the pressure on existing demand. According to an OECD report published in 2019, there will be 167 Gigatons of raw materials usage in the construction industry in 2060. To put that into context, one gigaton equates to 10,000 fully-loaded U.S. aircraft carriers!

 

The current market disruption could be an opportunity to help us drive  greener, cleaner, and more sustainable construction practices in the industry by forcing the use of recycled materials where possible. What further steps can be taken to mitigate the problems associated with the material shortage?

 

  1.  Planning well in advance
  2. Working closely with the supply chain and keeping in tight communication
  3. Discovering cheap and environmental substitute materials. Using services such as ENVIRONMATE (free leftover building materials marketplace)
  4. Allowing for longer lead times
  5. Sourcing locally
  6. Using reclaimed building materials, which can also be a solution to net zero government intentions. This would also avoid over reliance on Europe.
  7. Use recycled materials where possible
  8. Meeting British testing standards
  9. Refurbish buildings instead of demolition where possible

 

 

Daniel Gillespie, Director at Quartz Project Services shares his thoughts on how we can come up with sustainable ideas to help solve the material shortage problem.

“ We have and must start to think earlier and differently. At Quartz, we engage this process from inception, the ‘green agenda’ starts at the first meeting and stays a constant workflow through the duration of the development, occupation and life cycle costs. We are approaching schemes differently to be on point with the shift in the market conditions and demand. “

 

Digitalisation in the Construction Industry

UK lockdown has brought a great deal of change in every industry, including construction. Many construction companies and their workplaces have begun to consider new technological processes within digital and automated environments. This is not something new, however the widespread adaptation has become irreversible since the Covid-19 pandemic. As said by Hans Vestberg, “Disruption may be unprecedented, but things will never move so slowly again”.

 

 

For starters, a shift to remote working forced companies into using online software, particularly Cloud servers to maintain efficienct with effective communication channels given the forced lack of human interaction and hence face to face meetings. While we missed office life and believe nothing can truly replace interactions in person, it has brought a variety of opportunities and advantages for future working environments. We can frame it as shaping a new digital habit! Here is a small taste of the benefits seen:

 

  1. Increased efficiencies with real time, up-to-date information flows
  2. Enabled regular backups on web-based filling systems
  3. Increased data collection, supporting productivity and efficiency in the long run through analysis
  4. Greater focus on structural stability
  5. Adaptation of smart technologies
  6. Opportunity for a wider talent pool
  7. Improvised, new ideas

 

What lies ahead?

 

  1. The industry will become more data savvy, which is a big change for the construction industry that is typically traditional in it’s working approach.
  2. Construction professionals who understand new digital advancements and software’s will be in great demand.
  3. Technological advances could revolutionise almost all points of the construction cycle of a built asset, from conceptualisation to demolition.
  4. There will be an increase in the use of technology to lower a building’s carbon footprint and the use of resources and building models.
  5. By adopting new technologies, the construction industry will be dominated with mega-projects to build smart and sustainable cities.