Belfast’s real estate market has enjoyed a surge in demand for purpose-built student accommodation (PBSA) in recent years - and the momentum remains in the sector.
Indeed, market reports in March stated that 5,040 student beds have been developed across 12 PBSA schemes since 2016.
It has also been reported that supply will increase by a further 25% in 2024, with three schemes including over 1,200 beds due for completion soon, not to mention seven further schemes entailing almost 4,000 beds at various stages of planning.
Looking ahead, UCAS has reported that there will be a 20% increase in Northern Irish students seeking a university place by 2030 while a recent university-led submission to Belfast City Council stated that 6,000 additional student rooms will be needed in Belfast by 2030.
Several factors across the last decade have contributed to the rise in prominence of PBSAs, an area that has attracted interest from global institutional funds and local investors alike.
On a policy level, Belfast City Council’s city centre regeneration policy to enhance Belfast’s role as a learning city has been central to increasing the city’s student population.
Perhaps the most significant driver of PBSA, though, has been Ulster University’s move to its new campus in the city centre in September 2022, bringing with it the relocation of approximately 15,000 students and staff to Belfast from Jordanstown.
From a legal perspective, the initial wave of proposed PBSA developments coincided with some of the first instances of planning agreements under Section 76 of the Planning Act (Northern Ireland) 2011 being deployed as part of the planning process.
These ‘section 76 agreements’ as they are commonly known set out contractually binding provisions relating to the development proposed that might otherwise not be suitable for planning conditions, thereby allowing the planning authority to grant permission that it would otherwise refuse.
We are increasingly advising clients on what, until recently, was a lesser-known area of planning law, and we anticipate that it will become ever more prominent in the coming years, whether to deal with public realm improvement, essential infrastructure, social/affordable housing mix or otherwise.
Of course, whilst the burgeoning business of PBSA offers significant investment opportunities, it is worth noting that challenges also exist.
Spiralling construction costs may risk causing higher rents for students as developers seek to make the economics of the capital costs work for them, and may ultimately lead to weakened student demand.
A shortage of suitable sites for development, where planning policy limits the height of new development, for example, is proving to be something of a stumbling block for developers in south Belfast.
Furthermore, with developers and planners tending to favour schemes which create a sense of ‘place’, the lack of availability of sufficiently large land acreage close to Queen’s University is also proving to be an issue for developers and investors alike.
Widely reported and acknowledged issues with infrastructure in terms of water and electricity present additional hurdles, creating a risk that investors may seek alternative locations in which to invest.
Despite the challenges, however, the attraction of Belfast’s PBSA market persists, appealing to a growing number of international institutional funds and local investors in a market where demand, for the moment, still outpaces supply. Looking beyond Belfast, PBSA development looks set to gain momentum in Derry City, albeit with the same mixture of opportunities and challenges.
- Alastair Todd is partner in real estate at Arthur Cox
