How do modern methods of construction address today’s student needs asks Stephanie Marshall
In 2015 the market saw a peak in student accommodation development and investment in the UK with the purpose built student accommodation transacting c£5.1bn for over 49,271 beds (Knight Frank, Student Market Review, 2016).
Although the market slowed in 2016 to £4.5bn, student accommodation remains one of the hot topics of development in 2017. In Savills’ May 2017 report, 25,000 beds were being constructed across the UK and transactions are anticipated to reach £5.3bn by year end.
What has changed in the last 36 months for the student accommodation market?
The market has seen a large increase in purpose built student accommodation developments across the UK over the last fouryear period, reaching a peak in 2015, letting direct to students rather than through the standard channels of university halls. The result of this shift in the market has had a number of impacts:
- Influx in new developers to the market attracted by the return on investment and UK wide demand for beds, competing with the UK wide market leaders of Unite, UPP, Liberty Living
- Increasing construction costs due to UK Wide Tender Price Inflation, buoyant markets in London and Manchester and labour shortages for traditional trades
- Strict planning guidelines, local residence backlash, newly introduced moratoriums and BREEAM standards rising, CIL levels
- Complex city centre sites short on space, limited availability of sites generally – high demand for ‘prime locations’, challenging logistics, and maximising of bedroom numbers
- Rising quality levels driven by a surge in competition in the market place while maintaining value for clients
- Competing schemes to be the market leaders – the next ‘big thing’ cinemas, gym, large social spaces, dinner party rooms, saunas etc.
- Large injections of investments in the market and universities leading the way with design build finance and operate schemes
Demand has intensified and completion dates are locked down as the start of the academic year leading to a need to build faster, simpler and more economically. This has led the sector to seriously consider pre-fabrication, modular and volumetric construction.
Student preferences have remained consistent over the period with a focus on communal and social spaces and good central locations, however the bar has risen on the quality of amenity space available, choice of social spaces, built in technology and high quality, larger bedroom/living spaces.
The current range of choice for students has changed from the traditional halls of residence and cluster flat living arrangements to studios, twodios, premium studios and a large variety of cluster bedrooms and town houses. Although halls of residence and cluster flat living remain popular we have experienced an increase in the demand for solo living arrangements as clients look to meet the needs of International, mature and PHD students.
What does the 2017/18 student accommodate market look like for students?
With an increase in student accommodation development across the UK in Birmingham, Exeter, Guildford, Leeds, Reading, Colchester for 2017 there are many developments to choose from both in and out of town locations. Established markets in Liverpool, Manchester, Newcastle and Durham showcase a number of luxury developments offering students high quality bedrooms focusing on a ‘home from home’ feel, saunas, cinemas, gyms, bars and the like.
Although the quality of accommodation available and the student experience have changed dramatically over the period, rental income has not increased at the same rate. This may be due to the increase in supply of student accommodation on the whole, or due to an influx of new developers trying to get a foot hold in the market against some of the well-established outfits of Unite, UPP and Liberty Living.
In some locations, there is still a shortage of purpose built student accommodation or university led accommodation with students letting houses of multiple occupation in residential locations, an example of this is Durham in the North East.
In these locations plans are afoot for further development of student accommodation in both the private sector and university led, which seems to be a view supported by planning departments to release much needed family housing in key city centre locations.
What does the 2017/18 student accommodate market look like for developers and universities?
Savills’ report in May 2017 stated investment in the sector is predicted to reach £5.3bn. Assuming that there is still an appetite to develop, we believe the key for our clients, developers, funders and universities alike, is making the bottom line stack up financially while providing an efficient route to market to hit strict term time deadlines.
This approach has resulted in a change of methodology for a number of developments utilising various methods of pre-fabrication, modular and volumetric construction in lieu of traditional construction methods, while driving value for money and increasing quality of finish and variety of amenity spaces.
Elements of prefabrication, for example pod bathrooms, have become the status quo for student accommodation projects. Precast concrete and Steel Frame System solutions, widely used in the construction market generally have only recently been adopted by the student accommodation sector to speed up constructionand mitigate risk of delay at completion of the project in lieu of previously favoured traditional brick, block and timber construction.
There are examples of volumetric construction being utilised to construct large schemes in relatively short programmes; for example, 1200 bedrooms for Newcastle University. Although a relativelynew technique for student accommodation this form of construction has been widely used in the hotel sector for many years; for example, Travelodge Uxbridge in 2008. This type of innovation in construction could be the difference between a scheme which is viable and one which is not.
There is an additional challenge for those student accommodation providers who developed schemes five to 15 years ago. Due to the shift in the level of quality and expectations of students today, interiors, decoration and amenity spaces are thought to be outdated. For those clients wishing to update a development the quandary comes – where do you house your existing students in the mean time? Can the refresh be undertaken in the summer period or are there more wholesale changes required? Do you give up a year’s income to undertake the works, as well as fund the capital costs?
This sets a new challenge for the professional teams and contractors working on student accommodation projects – can the client save a year on the construction programme to gain a year of rental income? What is the price for this offset of investment vs. capital cost? Is there a large enough supply chain to meet an increase in demand? Can we plan sufficiently enough ahead to refurbish existing schemes in the down period without risking not completing on time?
This is fast becoming the acid test for our clients as they rush to the market to meet demand and see off the stiff competition, protecting their asset.
So, what is the plan?
In order to meet the demands of the sector, professional teams and contractors will need to be responsive, innovative and collaborative. In order to provide cost certainty for clients early in the process, to reinforce development appraisals and secure funding, benchmarking data and knowledge of the market becomes a necessity.
Clients will look to their teams to provide a plan to develop and complete their next development in the shortest programme available, providing value for money and certainty of completion, not always an easy equation to crack in this busy marketplace.
If the last two to three years are anything to go by, I think we are in for a fast paced, innovative and challenging few years. The big question is, what do the next generation of students expect from their accommodation? Only time will tell.
Stephanie Marshall is an Associate Director at Turner & Townsend, an independent professional services company specialising in programme management, project management, cost and commercial management and advisory services across the real estate, infrastructure and natural resources sectors.
With 104 offices in 44 countries, Turner & Townsend draws on extensive global and industry experience to manage risk while maximising value and performance during the construction and operation of clients’ assets.
For more information, please see www.turnerandtownsend.com