It’s all in the planning 

February 1, 2018

With planning applications for more student accommodation pending at the time of writing, Chris Dobson asks if there is simply too much of this type of development facing Newcastle, while reviewing other commercial property news from the region

The immediate answer to whether there is too much student accommodation appears to be ‘yes, there is’ with a common complaint being that such developments have taken up important city centre sites better used for office development.

Cushman & Wakefield’s UK Student Accommodation Report 2017/18 says a record number of new student accommodation bed spaces (30,000) were delivered in 2017 in the UK, taking the total number of purpose-built spaces available to 602,000. While the numbers of newly-delivered en suite and studio spaces have both increased significantly, the supply of studio rooms has increased by 106 per cent since 2014.

Overall rents per bed space in student accommodation increased 2.9 per cent between academic years 2016/17 and 2017/18, marginally above the 2.7 per cent seen during the same period in the previous year, indicating the sustained health of the student accommodation market as a whole. However, there were significant variations across the UK as well as by type and sector.

Home to two large universities, Newcastle’s student accommodation market has grown significantly over the last five years and is now home to 16,434 purpose-built student accommodation beds. In the last year, more than 1000 additional bed spaces have been brought to the market, and there are over 4500 beds in the development pipeline. Most recently, Newcastle City Council is minded to grant planning permission for a redevelopment of the former Tyne Tees Television site, on City Road, to form 222 student studios and five duplex studios in a seven to eight-storey development.

Despite strong student number growth, rapid development of purpose-built student stock has led to increased competition in the market, which is holding back previously strong rental growth. While university providers have increased rents by an average of one per cent between 2016 and 2017, private sector rents have remained fairly constant, with a one per cent fall in weekly studio rents.

David Feeney, advisory associate at Cushman & Wakefield, says it is encouraging that the student accommodation market continues to flourish despite initial concerns following the EU Referendum and the impact of increased student tuition fees.

“However, in a number of cases studio development has been driven by higher prices rather than by true student demand, which now risks oversupply. En suites and shared rooms provide a cheaper bed and more of a social experience, with communal and shared spaces,” he says.

“There is a real opportunity for developers to meet the demands for more affordable accommodation and provide more standard or en suite rooms for students. Studios are 45 per cent more expensive but do they offer a 45 per cent better experience? It is all about the value of the experience and this will increasingly drive students’ preferences for accommodation.”

In terms of supply, David says there are too many studios available but for the right product, that is good value clusters, there is plenty of slack.

Elsewhere in the region, it is Durham City that catches the eye with the promise of over 6000 private sector jobs delivering a £400 million boost for County Durham’s economy if proposals for the redevelopment of the County Council’s headquarters, the Aykley Heads site, get the go-ahead.

Hailed as a ‘once in a generation’ opportunity to help transform the county’s economic prospects, the creation of a new central business quarter capable of attracting thousands of high-quality private sector jobs could represent a game-changer for the county, according to indications from an independent analysis.

Aykley Heads, Durham City 

Hosting more than 30 businesses already with 1300 jobs, Aykley Heads is quickly establishing itself as a premier private sector location. The decision by Atom Bank to set up its global HQ there was quickly followed by sustained interest in the council’s business start-up and expansion incubator, Salvus House.

Independent analysis identifies that the city does not currently offer sufficient premises for business growth, despite the fact that half of the enquiries made in the North East are from businesses that would consider locating in Durham.

The proposals would start the process of the site becoming a major centre of private sector employment with a clear focus on quality jobs in areas such as finance, banking and legal services.

The masterplan would see the present council headquarters demolished with the council relocating to smaller, more affordable city centre accommodation. It also means that the development of four refurbished strategic sites around the county will continue at Seaham, Meadowfield, Spennymoor and Crook.

Newcastle Science Central 

Returning to Newcastle, Legal & General has secured planning for its second Grade A office building at Newcastle Science Central, as it continues to transform cities and regions across the UK, boosting local jobs and driving economic growth.

The 12-storey, 100,000sqm, office building will deliver modern workspace with 10,000sq ft floor-plates for over 1200 people in the science, technology and the knowledge sectors. Designed by international design practice, Ryder Architecture, the Grade A building will be to British Council for Office (BCO) standards.

It is also being built to BREEM Excellent standard with an EPC rating of A and a Wiredscore Platinum certification.

Ben Rodgers, senior development manager at Legal & General, says: “This planning consent is yet another great step in achieving these goals with construction of this flagship office building planned to start on site next year and targeted for completion in early 2020.”

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