If you went to University, think back to the accommodation you used to live in as a student. For most of us, running water and a bed were sufficient to get us through the eight months of the year, we were away from home and engrossed in all that life had to offer.
Before heading to University, I watched the BBC sitcom The Young Ones, starring the late Rik Mayall and friends, which built up what can only be described as, a horrific and disgusting caricature of student life which most of us would recognise. So horrific and disgusting, in fact that it was utterly hilarious. When they weren’t causing chaos, the characters lived in what one might kindly call a run-down and beleaguered student house.
To say that the provision of student accommodation has now moved on since the days of Rik, Vivian, Neil and Mike would be an understatement. Students now demand high quality accommodation and the market has reacted accordingly and investors are beginning to catch up.
Last month, Philip Hillman of JLL gave a fascinating presentation at the Student Housing 2015 conference, at the Congress Centre. JLL are forecasting that 2015 will see over £5bn worth of transactions in this asset class. In Q1 2015, over £3bn worth of transactions had been made, more than the total number of transactions made in the calendar year in 2011, 2012, 2013 and 2014. That is a staggering rate of growth and it will be interesting to see if this can be sustained.
Only last month Unite raised £306m as it seeks to increase its firepower in the marketplace and isin the process of buying a £225m 2,000-bed portfolio from Ahli United Bank’s UK Student Accommodation Fund. In early May 2015, Goldman Sachs and Greystar announced the £500m purchase of Knightsbridge Student Housing’s Westbourne portfolio, in a bold move that captured the attention of those of us who are interested, and engaged in the marketplace.
It’s not just acquisitions where the pace is quick. A number of schemes across the country are currently sitting on the desks of planning officers, waiting for approval. Some of the more eye catching schemes in the pipeline:
- A 600-bed scheme in Coventry proposed by AXO Student Living about to head in for planning.
- Over 1,300 new beds just submitted in Belfast.
- A 193-bed scheme proposed for the former St John’s Church School in Liverpool.
- 525-beds on the outskirts of Oxford.
- A 60 flat scheme by Osborne Developers in Winchester currently in pre-application consultation.
There is no doubting that the market is buoyant with transactions being made a rapid pace, and plenty in the pipeline. While yields remain positive risks remain, particularly at local level.
Student accommodation schemes are not always terrifically popular in their local communities, as a result of the perception of the anti-social behaviour. While outdated, this rigidly held belief can make the pre-application consultation period difficult, as residents groups do everything they can to stop a scheme in its tracks. (It would be re-miss of me not to point out that we run planning consultation and engagement programmes that can help offset these issues!)
Combined with the perception among some local authorities that student accommodation does not generate as much in the way of direct financial contributions to council coffers as a residential scheme, developers can face problems with officers at the pre-application stage. Cash strapped councils are looking to maximise the amount of money made from development or land in their districts, as central government funding is slashed.
And with a likely re-assessment of Higher Education funding on the way, and with it, a review of tuition fee levels, you might expect the market to be a bit more nervous.
Overall, the student accommodation sector is bullish and continues to thrive. This asset class has matured beyond all expectations in recent years, and has become a real alternative investment class for consideration.
It would be fair to say; the days of Rik and Vivian causing chaos in a grimy student flat are soon to be well and truly over for students.