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Richard Pilsworth: "Considerable change and dynamism is expected in the education market"

Supply and demand

The continuing growth of education sector brings significant opportunities, says Richard Pilsworth

Posted by Stephanie Broad | June 17, 2015 | People, policy, politics, money

Against the backdrop of a rapidly rising population, the education sector is one of the few parts of the UK economy that continued to grow consistently in the aftermath of the 2008/9 credit crisis. With current projections suggesting even more rapid demographic escalation in London, the South East, East Anglia and Oxfordshire in coming years, the pressure to create new educational facilities and upgrade and enhance existing establishments can only increase. This will bring huge demand for property consultancy and construction services, says Pilsworth in the latest edition of Building Trends just published by Bidwells.

At the same time as public finances are constrained, student numbers are mushrooming and with many educational organisations encompassing surplus land, private sector participation within the sector is being actively encouraged.

Overall, considerable change and dynamism is expected in the education market over both the short and medium term. At 287 million sq ft, the university sector, by itself, is larger than the total NHS estate. Education is a very important part of the UK real estate industry. 

A rapidly expanding sector

The education property market is founded on the demographics of younger age groups. In the years ahead, the child population of England is projected to rise even more rapidly than the country’s overall demographic profile; in the ten years to 2022, the 0-15 age category is projected to expand by 9.2% nationally. 

Growth in the core Bidwells East region is projected above the national average at 11.3% whilst that of the South East is forecast to be on a par with the national situation at 9.2%. The East is second only to London which has a remarkable 16% growth forecast. 

It follows that demographic pressure on the education system in the East of England will be especially pronounced in the years ahead. This will, in turn, exert pressure on existing educational buildings – the utilisation of which can often be improved via professional advice – and bolster demand for new schools. 

Output and consumption increasing

Strong demographics underscore an expanding market for investment in buildings, goods and services as most schools and colleges lack the skills and experience to capitalise upon growth factors from a property market perspective and external support is often required. 

From a property and business point of view, the education sector is comparatively ‘recession-proof’ and subject to much less volatility than many other areas of commerce. The sector has annual turnover of approximately £35 billion and makes £19 billion of purchases annually. 

Bidwells has undertaken a detailed review of the education sector within the East and South East from a property market perspective and concluded that the demand for goods and services will make education one of the region’s most active property sectors in the next decade. 

Primary growth drives demand

In the period 201/13 to 2019/20, the state primary school population in the Bidwells region is projected to grow by 12.5%, equating to an additional 77,337 pupils. This rate of growth will place strong pressure on existing schools with regard to classrooms and teaching facilities, requiring many schools to expand. Furthermore, new schools will be required in areas of particularly rapid pupil expansion. Primary schools are smaller and more localised than secondary schools, so the number of new schools and individual expansion projects for the primary sector will be especially pronounced. 

Secondary sector also expanding

In the period 2012/13 to 2019/20, the state secondary school population in the Bidwells region is projected to grow by an additional 49,242 pupils.

Private education

There are currently 360 private schools specifically in the Bidwells region, with approximately 99,170 pupils across all age ranges. Whilst there is some inevitable correlation between population density and the provision of private education, the distribution of private facilities is inevitably also strongly influenced by affluence and the presence of higher education establishments. 

Oxford and Cambridge are obvious examples but Buckinghamshire, Hertfordshire, Essex, Norfolk and Suffolk also represent important concentrations. In contrast to the state sector however, the private market is projected to remain relatively static in the next five years. 

Higher education also stable

Department of Education data suggests that the undergraduate population of the UK will flatline over the next decade. Within the Bidwells region specifically however, some growth is inevitable as strong demographic pressure feeds through to higher student numbers. 

Based on our analysis, there are presently just under 195,000 university students in the Bidwells region in 13 universities. These establishments have 1,540 buildings which extend to 26.7million sq ft in area. The cities of Oxford and Cambridge have a combined total of 16.5 million sq ft of university accommodation.

Although student numbers are relatively stable, against a market of this magnitude, the development and investment sector for student accommodation can only grow still further. 

Richard Pilsworth is Partner at Bidwells.

www.bidwells.co.uk/eresearch/building-trends-spring-2015   

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