Leicester is the new Coventry, which was the new Sheffield, which was the new Newcastle. Student Accommodation in every city has various levels of supply saturation but in 2022, the city causing headaches for PBSA operators and investors is Leicester.
Yesterday, I walked the city yesterday for the first time in 3 years, toured 13 properties, visited SU Lets, both universities, discussed applications and student accommodation with 20+ people. Let’s be clear, the issues here are around De Montfort University primarily but University of Leicester also plays a part in why the market is so difficult for PBSA in 2022.
Why is Leicester so tough for PBSA right now?
New University of Leicester Supply
University of Leicester has brought 1200 new beds online this year at its new Freemen’s Common campus whilst refurbishing Nixon Court. UoL now has a good range of stock to choose from and less reliance on PBSA for their international students in their half of the city.
Reduced nominations agreements
With new halls coming online and with a desire to reduce financial risk, both universities reduced their nominations agreements with private accommodation providers. De Montfort halved their nominations for 2022/23 to avoid any risk against falling undergraduate numbers. This was done early in the market which is a clear demonstration of the University preparing themselves for a smaller intake.
Student number decline
From 2019 to 2021 student numbers at DMU dropped by 5.2% to 24,045 and University of Leicester declined by 10% to 14,135 from a high of 15,705 in 2018. Take this 15% drop in city student numbers plus the 2500+ PBSA beds built in the last 4 years, the 1200 new UoL beds and you’re looking at a very hot market.
De Montfort University’s blended learning
Through COVID, DMU moved to hybrid learning. Post-COVID (dare we say that yet?), students are keen to get back to normality. DMU appear to have been slow to update their website learning policies for 2022/23 intake. Their Vice Chair of Education is also leading the government commission into blended learning.
DMU rankings drop
Overall academic rankings have seen DMU drop to 120 out of 130 UK universities which will definitely impact the number of international students in particular. I expect this to continue into next year as the rankings are set until June 2023. However DMU is performing well in 2022 with regards to student experience which bodes well for next year domestic students who focus more on residence life than academics compared to international students as a general rule.
Volume of PBSA beds near DMU
The streets near Oxford Street and Southgates are lined with student accommodation in much the same way that Sheildfield in Newcastle became something of a student district in 2017. The sheer volume of beds means that students have ample choice and we’ve seen offers of up to £600 per room and the gap closing between HMO and PBSA. It’s difficult to stand out in a competition for footfall.
Both Universities need to balance the books
Over the course of the last 4 years according to HESA data UoL and De Montfort have taken between 22-25% of their students from international markets. They will undoubtedly have taken a financial hit from COVID. Both Universities have made sweeping redundancies throughout and post-COVID which may point to a wider problem.
SU Lets control of the market
SU is the non-profit body set up to consolidate the accommodation booking process through official University and Union channels for UoL and DMU. It has an on campus presence at both Universities and only works with one student accommodation provider in Student Roost combined with traditional HMO stock. This makes targeting existing students particularly difficult as their focus is on filling these beds over any other operator and no accommodation operators can advertise on campus.
There are still plenty of opportunities to fill beds in Leicester and some PBSA assets are already very close to 100% let without nominations agreements.
Leicester has taken some of the heat off of Coventry as the most challenging PBSA market in the UK but in my opinion it stands more of a chance of a quick recovery because of it has exposure to two large Universities in a medium-sized city where Coventry only has one major University (Warwick is not really Coventry IMO). Let's hope that Leicester follows the the pattern set by Newcastle which came through saturation within 3 years but in order for that to happen DMU needs to fine tune its approach to blended learning and both need to invest heavily in academia and international recruitment as both Newcastle and Northumbria universities did back in 2017.