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PBSA: Application’s What You Need

by | Mar 12, 2019

In this blog, we explore the relationship between student applications and PBSA asset performance, in light of the most recent UCAS statistics on student applications for 2018/19.

 

When we released the CBRE Student Accommodation Index covering performance for the academic year to September 2018, we produced several additional articles looking at key drivers of asset level performance. One of these identified a strong positive relationship between growth in student applications and growth in asset rental and capital values; in other words, purpose built student accommodation (PBSA) assets in towns where student applications had increased saw stronger rental and capital growth on average.

With the release of the latest UCAS figures covering main scheme applications (i.e. excluding Clearing) for the current year, it is possible to categorise towns by the level of change seen in applications. Should the historic relationship shown in Figure 1 persist into the future, this could be a strong guide to relative performance in the coming year(s).

Figure 2 compares the growth in applications in the year 2017/18 on the y axis (versus the 2016/17 academic year), with the growth in applications in the most recent 2018/19 year on the x axis (versus the 2017/18 academic year). At the aggregate level, student applications have decreased, from 2.899m in 2016/17 to 2.793m in 2017/18 and 2.726m in 2018/19. This fall (of 6% in total) is a reflection of UK demographics, and should not be interpreted as a long-term decline in demand for University education, rather just a short-term blip in the number of 18 year olds. Consequently, a majority of locations have seen applications fall in each of the last two academic years.

Figure 3 looks at the Top 20 towns (by number of applications in 2018/19) – those likely of greatest interest to investors – within which there was significant variation in performance.

  • Half of Top 20 towns have seen falls in applications in both years.
  • In individual years, eight Top 20 towns saw a greater than average decline in applications in 2017/18, and 13 saw a greater than average decline in 2018/19.
  • Six Top 20 towns – Cardiff, Belfast, Southampton, Oxford, Bath and Cambridge – saw greater than average declines in both years. All are in the 11-20 tier.
  • On the other hand, three Top 20 towns – Leeds, Bristol and Warwick – saw applications increase in both years.
  • Manchester and Glasgow meanwhile delivered applications growth that was better than the UK average in both years.
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