The topic of student accommodation so often encourages people to reminisce about their own time at university: dealing with evasive landlords, fending off mice at night, or coaxing recalcitrant boilers into action as ice forms on the window panes.
These stories of dire student housing are rapidly passing into antiquity. Many probably come from a fallow period in the 90s, when previously suitable halls of residence became either overcrowded or outdated.
The Committee on Higher Education’s 1963 Robbins Report was keen to point out "the educational and social advantages of living away from home" and this precipitated a wave of investment in student halls. This investment tailed off within the higher education sector in the ‘90s, but private sector investment grew to take its place. From 2000 onwards, this private sector investment has really come into its own.
The impact of increased tuition fees has coincided with a greater transparency around what universities offer, and the creation of publicly-available league tables, which rank universities by their graduate employment levels. The convergence of these three factors has resulted in students who now consider their university experience much as they would consider any other consumer purchase.
Student expectations have changed (arguably, they have also increased) and universities have responded to this by focusing not just on their academic credentials, but also on their facilities and estates. While students still prioritise academic excellence when choosing a university, accommodation is now rising up the scale as an important secondary factor in their decision-making process.
The quality of a university’s accommodation doesn’t just impress (or put off) students taking a look around on an open day. The experience they have in their accommodation will have an impact on National Student Survey and International Student Barometer scores, which UK and international students use to help decide which university to pick. Student accommodation can also relate back to academic success. Recent research by the HE Academy showed that a sense of belonging and good peer-relationships are important in ensuring students feel happy at university and are therefore able to stay the course and achieve their best. Living in good quality, well managed accommodation run by staff who understand these things can make a big difference, as research from the US demonstrates.
So, it’s clear that there is an imperative for universities to view their accommodation more strategically. Universities have done this in a variety of ways. One model is outsourcing accommodation to a private provider. Other universities will invest in their own stock, perhaps choosing to design accommodation to target a specific student demographic, such as international students, as a few institutions are already starting to do.
Last year saw an increased interest from annuity investors in “income strip” deals, partly driven by poor yields in gilts and government bonds. A number of universities have successfully completed such transactions in which they guarantee long term secured rental income in return for an increased valuation, allowing capital to be released for other purposes. A recent deal secured by the University of Aberdeen in partnership with the UNITE Group saw a return of approximately £5.5 million for the university, which was used to offer more affordable rents for their students.
From a university’s viewpoint, investment in student accommodation is rapidly making its way up the list of priorities. But what about the view from the other side of the table – how do investors see the student accommodation market? The answer is: very favourably. It wasn’t always this way, of course. Twenty years ago, investors barely had any access to student accommodation investment. Now, almost every UK pension fund, life fund, and insurance company will have some exposure to student accommodation as an investment.
Student accommodation forms an important component of a balanced investment portfolio because of its stability and non-cyclical nature. There are therefore deep pools of capital available to universities wanting to develop their student accommodation – either alone or in partnership with others. This may come from sovereign wealth funds, hedge funds, insurance/pension funds, private investors, and forward-funded development.
Taking a look now at the future for the student accommodation market means we must first take a look back. The 2012-2013 academic year started with a lower UK student intake, which predominantly related to three factors: a reduction in funded places, more students deferring their university placement for a year, and unintended fall-out from the changes in the student number control mechanism. Several new measures to the process for allocating student places to universities for 2013/14 were announced last week. These changes should remove some of the caution universities have previously exercised when deciding upon the number of offers to make to prospective students, and it should therefore translate into improved recruitment levels. Taken together with the impact of deferral rates stabilising, these new measures are expected to contribute to meaningful student number growth for 2013/14. The UK’s higher education system is internationally renowned, and while UK universities retain such an outstanding reputation, places will always be in high demand.
About the author
Paul Harris is Customer Experience Director for UNITE Group. He joined UNITE in 2010 as Group Communications Director and is part of the Group’s Executive Team.
Paul has worked across a range of private and public sector industries in a variety of roles covering media relations, internal communications, branding and marketing. He worked on the Consignia rebranding programme, was Head of Brand for Royal Mail and was part of the team working on the corporate rebranding of Abbey and sale to Banco Santander. Senior roles at Laing O'Rourke and Smiths Group preceded a role with the South West RDA, where he worked closely with government departments on economic development issues.
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