The four universities in Cardiff teach more than 42,000 students – which is roughly a fifth of the city’s population of 364,000, according to data from Savills.

No wonder then that developers have flocked to the city, building block after block of purpose-built student accommodation (PBSA). However, as more and more PBSA is built, many schemes across the city are struggling to reach full occupancy – and others have applied for change of use to hotels or general residential.

Some property experts say that this is a saturated market, while others claim that there is still money to be made in Cardiff.

Elgan Jones, development director at Cubex, is from Cardiff and studied in the city as a university student. For him, the reason both students and developers come here is obvious.
“It’s a very exciting city to live in, so students are attracted to that and developers are attracted to that, too,” he argues, adding that Cardiff’s status as a capital city gives it something that many other cities do not have.

Eamonn Coleman, chief executive of JEDS Investments, adds that developers are also attracted by the low cost of land in the city. JEDS Investments recently submitted a planning application for 711 student beds on a site on East Bay Close in Newtown that it paid just £3m for. If accepted, it will be Cardiff’s largest student accommodation building so far.

Coleman is confident that the scheme will be fully occupied because it offers amenities that most other PBSA developments do not. The planning application for JEDS Investments’ scheme features football pitches, gyms and tennis courts.

However, confident as Coleman is in his own scheme, he admits that the market is not perfect. “I think there is a bubble,” he says. “You’ve just got to be careful.”

It is not hard to find examples of student accommodation developments that are struggling to reach capacity. The developer of a PBSA scheme in Cathays Park applied for a change of use into a hotel, reportedly because it did not want to push ahead with the scheme due to market conditions.

Elsewhere, DG1 Developments has also applied for a change of use after raising concerns that its scheme on City Road would be unviable because of “the over-provision of especially built private student accommodation in the city, and in the pipeline”. The developer’s application to turn the block into residential accommodation was blocked by the council on the grounds that the scheme was low quality and not affordable enough.

The proliferation of student accommodation blocks has not gone unnoticed by the students themselves. Eleanor Savva, a third-year student and features editor at student publication Quench Magazine, worries that the over-development of student housing blocks is sucking life from the city – with some detractors complaining that tall, generic PBSA towers are overshadowing historic buildings and taking away from the city’s character.

“It feels kind of soulless,” Savva says. “It takes a big chunk out of the soul of Cardiff because it’s somewhere people live temporarily.”

Overheated market

Savva says that the overheated market has led to aggressive marketing – such as advertising around university campuses pushing students to secure a flat for the following academic year well before Christmas – from letting agents that are increasingly desperate to fill the accommodation. “Certain ones have been particularly bad,” she says, claiming that pushy sales tactics cause students needless stress.
“There are too many student houses, but students are made to feel like there’s a limited amount. They’re put under so much pressure to sign up really quickly even though it’s not really necessary.”

She has also noticed many more student accommodation blocks in her third year than in her first and adds that she does not know anyone personally who lives in them. “They’re all promoted as luxury accommodation,” she observes, adding that she would feel more comfortable if developers were building affordable schemes. “The luxury accommodation is not really catering to the needs of the majority.”

JEDS Investments’ Coleman also believes that many of the student developments are not affordable enough. He says he is aware of many schemes that are struggling to attract students, although he blames the developers for this rather than the market as a whole.
“Look at the rents they’re charging,” he says. “That’s the problem. If you can reduce rent by £20 to £30 a week, that’s a lot of money to a student.”

The saturation of the market is why CA Ventures is avoiding developing PBSA in the city – at least for now. The company entered into the British market from the US last year with plans to spend £500m in the UK (p31, 04.10.19), but Christian Davis, vice-president of acquisitions at CA Ventures, says that the student accommodation developer has no plans to spend any of that cash in Cardiff at the moment.
“Fundamentally, I don’t think there’s anything wrong with the city at all,” Davis insists. “What Cardiff does have is what a lot of people call indigestion with a lot of projects in the pipeline.”

Davis puts the “indigestion” of the Cardiff market purely down to supply and demand dynamics with too many developments and not enough students. “I don’t think it’s a case of developers being greedy,” he argues.
Cooling-off period

Developers are split on whether or not the council should take action on this issue. On the one hand, Davis insists that neither the council nor the planning system should step in to do anything on what he sees as a simple case of supply and demand economics.

He feels that the PBSA market in Cardiff is naturally cooling off now because of oversupply and that – in a few years’ time – it will bounce back.

Cubex’s Jones also does not think the council should be expected to do something about the state of the PBSA market. Instead, he advocates for developers regulating themselves by moving away from PBSA and towards build-to-rent or mixed-use developments.

JEDS Investments’ Coleman has a different take. He thinks the council needs to make sure that too many student accommodation developments are not going through the planning system in order to protect the viability of the schemes that are already seeking consent – such as his.

“Would I be happy with another 2,000 student beds going into the pipeline? No, I wouldn’t be happy if the council grants planning for more student beds,” he says.

However, the council does not appear likely to do anything radically different. A spokesperson for Cardiff Council says that the range and choice of student accommodation reflects demand.

“The council considers any new development proposals on their planning merits. New supplementary planning guidance has been prepared and approved by the council to inform new student accommodation developments,” the spokesperson adds.

Whether that is enough to stop an oversupply of student accommodation in the city remains to be seen. If developers continue to target the Cardiff market as they have done in recent years, then the number of empty units is only likely to increase.

Originally shared in Property Week November 2019.