Student housing tempts wealthy investors

From The Guardian:

student housing tempts wealthy investors

Some of the world’s richest people and sovereign wealth funds are turning their attention to student housing, with the increasingly luxurious and expensive purpose-built accommodation becoming regarded as a must-have part of their investment portfolio.

Investor demand for student accommodation blocks is so strong that some potential buyers were forced to stand during presentations at a student housing investment conference in a ballroom in Covent Garden, central London this week.

James Pullan, the head of student property at property consultancy Knight Frank, said demand for investment in student accommodation was riding high despite concerns that Brexit might reduce the number of high-spending foreign students coming to the UK.

“They have seen how much others have made from student housing and want to join them,” Pullan said. “More than 70% of investment is coming from overseas buyers, from sovereign wealth funds and ultra high net worth individuals [people with investable assets of more than $30m] and private equity.”

Andrew Mason, the organiser of the Student Housing 2017 conference in the De Vere Grand Connaught Rooms, said the annual gathering had grown from 200 people to more than 500. He described student housing as a “truly global asset class”.

The UK purpose-built student accommodation market is estimated by Knight Frank to be worth £46bn and new developments completed this year are expected to total a record £4.7bn.

Last year, £3.1bn worth of student halls were sold – more than double the amount traded in 2013 and 2014. All five of the biggest deals – worth a combined £1.5bn – were sold to overseas investors. The largest transaction was the purchase by the property arm of Temasek, the Singapore state investment fund, of a portfolio of 25 student buildings in several cities including London and Manchester.

Hiew Yoon Khong, the chief executive of Temasek’s real estate arm Mapletree, said at the time: “Student accommodation is a big business and relatively low risk.”

Knight Frank’s research shows that more than a fifth of students are now prepared to pay more than £160 per week if the facilities impress them. The profits available to investors have increased as providers have raised rents in return for more hotel-style facilities. Gyms, pools, private cinema screens and concierge services are often standard – a long way from the grotty Young Ones-style digs long associated with student life.

Shared bathrooms are a thing of the past in most new developments and many contain studio bedrooms with a bathroom, kitchenette and living space as well as a bed and desk. While students are demanding more luxurious rooms, developers and their designers said it was the standard and range of communal spaces that were most important for attracting the highest-paying students.

The Neighbourhood, a new development in Cardiff, offers a 24-hour concierge service offering to help its student tenants with “anything you need – from calling a late-night taxi or locating Cardiff’s best burgers, to advice on tomorrow morning’s presentation or just to chat if you’re feeling homesick”.

The developers of The Neighbourhood said: “We spotted a huge hole in a very densely populated student accommodation market, so we decided to create an exciting, bespoke new brand providing experiential, high-end, high-spec, service-driven luxury urban living experiences for students.”

Residents of the 10-storey development in central Cardiff are offered weekly room cleaning, a twice-weekly laundry service, a 32-inch smart TV, a prepared breakfast to take to lectures, a “fully loaded” gym, cinema and free bikes. But all that comes at a price – the cheapest rooms cost £189 a week and it costs £236 for an extra large studio, while traditional halls provided by Cardiff University cost £80 a week.

Naomi Cleaver, a television star interior designer who has swapped designing holiday villas to kitting out student halls for several of the biggest developers, told the conference: “Gyms don’t have to be fancy, but they are essential even if it’s some simple equipment, a mural and some mirrors. Group study spaces are more and more important and screening rooms are absolutely expected.”

The good behaviour of today’s students was a recurring theme at the conference. Brian Welsh, the chief operating officer of Threesixty Developments, said he was constantly worrying about tenants “wrecking the place” in the early days of his career but he now finds students need to be actively encouraged to have fun.

“We used to turn the lifts off at 9pm because lifts are very expensive to fix and groups of drunk students tend to jump up and down in them,” he said. “You would think that [student] behaviour would get worse and worse, but actually this generation is quite boring. It’s possible that at four o’clock [at the official conference party in nightclub Sway Bar] we’ll down more pints of ale than the whole of the students’ union of Swansea.”