This week is the annual Property Week Student Accommodation conference in London. It’s attended by around 500 property professionals including; investors, developers, operators, universities, contractors and consultants. Some refer to it as the annual group hug where we reflect on how the sector/ asset class has performed in the last year and what might be in store for 2014. There is no doubt that 2012 was a tough year, I blogged about it – click here to see it. But this year is looking much stronger again in terms of occupancy levels, despite some major headlines with Opal Property Group going and others re-structuring their finances at present.
So what is all the fuss about with Student Living and why has it remained so resilient during the last five years, while most of the property/ construction sector has been slow? Well here’s some numbers which give some context to the scale of the sector today…
- There are around 460,000 purpose built student living bedspaces now in the UK, in circa 860 buildings.
- The number of full time students for 2011/12 was 1.72m and this has risen steadily over the preceding years, with an overall increase of 20% in the last ten years.
- Universities own around 50% of the student living property market, with the balance being private operators. Just a few years ago, the ratios were much higher for Universities (70-80% of market share).
- The average weekly rent for a bedroom in a purpose built student living development is now £110+, with London fetching over £180 (this equates to between £4500-£7500/ year minimum). There are high-end rentals in London of £500+/ week (£21k/ year).
- The sector has seen over 1.6 billion of investment activity since September 2012, accounting for 30,000 beds.
- Applications to study in the UK increased by 3.1% up to June 2013, the highest number since 2009.
- Overseas student numbers are expected to increase by 15-20% by 2018 which will generate £3.9bn in tuition fees for Universities.
(Sources: Deloitte Student Housing 2013 and GVA Who owns student housing?)
So what does the ‘average’ student spend in a year? Here’s a basic overview;
- Up to £9000 in tuition fees (UK students).
- Around £5000 in accommodation costs.
- Around £5000-6000 in living costs.
- TOTAL = £20,000 (x3 years = £60k for a degree)
If you multiply this annual figure by 70% of the total 1.72m students (allowing for internationals and live at home students), you generate a figure of over £24bn. That starts to give some tangible scale to the ‘value’ of students.
For accommodation only, the annual figure is around £2.3bn based on the 460,000 bedspaces.
So where are the opportunities going forward? As you’d expect with property, its all about location. All of the UK Russell Group University Cities are well provided for, especially as these locations tend to have multiple institutes to serve, which provides investor confidence. Nottingham has one of the highest concentrations of privately owned beds (90%), although this figure will be skewed by the fact that UPP own most of the on-campus stock at both the University of Nottingham and Nottingham Trent University. Oxford and Cambridge only have 10% privately owned provision, but that is influenced by difficult Planning conditions and land values. Brighton and Norwich are among the strongest potentials for growth.
Knight Franks latest report, Student Housing 2014 can be seen here. This again reinforces the strength and continued investment potential in the sector.
To date, our practice have designed and delivered over 14,000 bedspaces for student living. This equates to around £500m of construction activity! See a small selection of our recent projects here. Or contact me to find out more | firstname.lastname@example.org
Big numbers when you start to add this up. That is why this asset class has become so important and is still attracting strong investment.