Student accommodation puts its hand up
Total Property - Issue 7 2019
Research from Bayleys’ global partner Knight Frank concludes that student accommodation plays a significant role in drawing students to university campuses, and is attracting a strong following among investors.
The Global Student Property Report 2019: Identifying global trends in the student property sector says it is emerging as a compelling asset class underpinned by strong demand, attractive yields and stable incomes.
The report found cross-border capital accounted for 40 percent of investment into student accommodation internationally over the past three years and that globally there is a structural undersupply of property. The response will involve collaboration with investors, developers and education providers.
Emily Fell, director of capital markets for Knight Frank Asia Pacific, says student accommodation is a defensive, counter-cyclical asset class laden with opportunity. “Globally, it has proved to be very resilient to economic and political uncertainty, which is a crucial consideration in today’s environment.
“The sector provides portfolio diversification to institutional investors and is now seen as a mainstream asset class.”
In New Zealand, tertiary institutions own and control much of the student accommodation, which Fell says was true of the UK a decade ago. “The higher education institutions were the majority provider of accommodation in the UK, whereas now 90 percent of new bed spaces are provided by the private sector.”
Universities realised the private sector could provide higher-quality stock, helping to attract students. A similar pattern is likely in New Zealand and Fell says this could bring big investment opportunities.
The University of Waikato’s (UOW) new campus in Tauranga’s CBD faces a challenge as growing rolls put pressure on bed space.
UOW leases local Durham Mews and Mayfair Court apartments from the private sector, but is going down the purpose-built path via a partnership with Quintex Properties to develop new facilities it will lease back.
UOW’s senior deputy vice-chancellor Alister Jones says the university is “looking at potential accommodation models and very happy to talk with developers and investors who can recognise the value in this sector.
“The efficient provision of student accommodation is a cost-recovery model and the university has to make its dollars work for it from an investment perspective.
“As with all property, the true value lies in the land and the buildings and can be unlocked over time. However, perhaps this is best undertaken by the development sector.”
Quintex Properties has consent for complexes near the Tauranga campus which UOW will lease back and manage.
In Hamilton, UOW is building student apartments on its own land, but Jones says it is open to other models. If someone purpose-built a facility and came to them, the university could guarantee a year-round lease.
It is looking to increase bed space in Hamilton and Tauranga but “there’s not a lot of existing commercial property stock suitable for conversion so we need to look at new-build options”, Jones says.
Victoria University of Wellington has 15 student halls offering a range of accommodation. Most are leased from the private sector.
Director of student and campus living Rainsforth Dix says with students increasingly mobile and selective about where they study “universities have to consider accommodation as an enabler when the rental market is not able to meet demand”.
The emphasis had been on halls of residence for first-year students, but is moving towards students at higher levels due to rental market unaffordability.
Ian Cassels of The Wellington Company has been redeveloping commercial property into student accommodation. The media dubbed him “an unlikely saviour for desperate students” this year when he offered budget accommodation rates in an inner-city hostel.
This was a temporary solution; the university leases the building through the study year and it was fully-committed from the first semester. But it highlighted accommodation needs, particularly with the drive for more international students.
Last year, a large apartment block leased to Wellington Institute of Technology was sold to a Chinese company for $28.3 million.
Te Pā Tauira – Otago Polytechnic Student Village garnered a raft of industry awards in 2018, with its accommodation complex praised for its scale, quality and innovation. Costing more than $20 million, the 231-bed precinct within the main Dunedin campus offers dorm rooms, studios and apartments.
Tracey Howell, Otago Polytechnic’s capital works and facilities manager, says it’s a “modern, contemporary building which exceeds expectations on many sustainability fronts”.
Otago Polytechnic owns it and partners with Campus Living Villages for management.
Meanwhile, its Central Campus in Cromwell recently opened five self-contained houses to supplement limited private sector rental opportunities.
Kelly Gay, Central Campus manager, says with plans to expand educational offerings, accommodation is a priority.
The houses can accommodate 25 students, are oversubscribed, and the polytechnic aims to build two more. Otago Polytechnic owns and manages the houses but Gay accepts this may not be the best use of capital, saying the polytechnic would consider partnerships.
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