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Does student accommodation drive businesses away?

Does student accommodation drive businesses away?

The Purpose-Built Student Accommodation (PBSA) sector is growing rapidly with new developments springing up in cities and towns across the UK at an unprecedented pace. There are not enough beds to go around in traditional university halls of residence and private developers are rushing to fill the gap.

The latest data from Savills shows the scale of the growth, with £4.5bn of student property being traded in 2016 and £5.3bn being traded in 2017. That is growth of almost 20% in a year and the tide of new developments has not slowed in the meantime.

Development on this scale generally leads to a backlash as people begin to identify a potential tipping point or evening out of the market. The latest evidence of this comes from Loveitts, an auctioneer and estate agent, which believes businesses in Coventry are being squeezed out by all the new student development going on.

The theory goes that new PBSA developments are taking up valuable real estate which would otherwise have been converted into commercial space for businesses.

However, this analysis seems to be rather one sided. Whilst office-based businesses may be struggling many other types of business are flourishing because of a growing student base. Students are well known to be a huge booster for a city economy for two main reasons. Firstly, they spend money in the city which otherwise would not be there, especially in restaurants, bars and convenience shops. This helps out businesses in a sector which is otherwise experiencing hard times thanks to the falling wages of the general population – when you earn less, eating and drinking out is one of the first things to fall by the wayside.

Secondly, students are willing and able staff for a huge variety of businesses. They are willing to work long hours to fund their university life and are generally under the age threshold for the full ‘living wage’, thereby saving employers money and reducing their outgoings.

A good example of the above principles is the University of Leeds which is responsible for injecting an estimated £1.2bn into the city; a big chunk of that comes from its large student base which spends a huge amount each and every year.

PBSA is an easy target for many businesses and people as it is new, prominent and designed for the benefit of people who don’t generally come from the place it is being built. However, to blame student housing for businesses failing seems to be stretching that a bit far. The benefits of new developments outweigh the negatives and new PBSA should be welcomed.