Higher education and higher expectation: student accommodation

Ross Hamilton
Universities across the UK are under pressure to deliver accommodation for increasingly discerning students. University-owned and private Purpose-Built Student Accommodation (PBSA) developments are scrutinized for their facilities and their value for money.

Today’s universities operate in a competitive market, where student recruitment is influenced by many factors—not just academic reputation. The overall student experience now caters for a more discerning generation—students (and often parents) are paying customers who carefully assess what they’re getting for their money. The quality of the accommodation plays an important role in this culture of higher expectation, and can be a recruitment differentiator.

Uncertainties around the effect of Brexit on research funding and student/staff recruitment, constrained capital funding and a complex picture of alternative revenue streams combine to challenge higher education institutions (HEIs) in every aspect of their estate planning.

Like their nationwide colleagues, HEI estates directors in the North East face the challenge of providing good quality student accommodation. For most, the pros and cons of building ownership are frequently under review, challenging the accommodation portfolio’s suitability, location, variety/diversity, flexibility, condition, maintenance, and capital and lifecycle cost-effectiveness.  

Ownership is no longer the only option, as new models of PBSA continue to emerge—potentially moving the accommodation off the balance sheet, and reducing the maintenance burden. At the same time, institutions still have to maintain a cohesive identity, with community and welfare responsibilities to consider, which may require careful handling if accommodation is contracted out.

Achieving the best balance of accommodation remains a priority, with institutions seeking to cater for all sections of their student body. From a student perspective, the NUS recently called on providers to incorporate more affordable stock into their strategies, and on planning authorities to prevent over-investment in the more expensive studio market

In 2018/19, the proportion of UK bed-spaces provided by the commercial sector reached 50 per cent of total stock, up from 39 per cent in 2012/13[2]. For investors and developers, this has become a reliable long-term asset class and revenue stream, with growing capital value and rental incomes across the UK market. Here in the North East, student accommodation is seen as a stable investment class in an otherwise fluctuating commercial market.

The North East is a great choice for higher education, offering a cost-effective standard of living, and many highly rated universities and colleges—among them, the universities of Durham, Newcastle, Northumbria, Teesside, and Sunderland. The region’s student population has risen considerably. The city of Newcastle-upon-Tyne, for instance, has increased its overall student body from 25,000 students in 2001 to 51,000 in 2017[3].

The sector has a substantial accommodation property holding, but more is needed throughout the region to keep pace with growing demand, together with replacement and refurbishment/maintenance needs. Our team is working with several clients in the region, on very different models, to provide deliverable, affordable solutions which fit the business case.

In Newcastle, we are supporting our UK-wide client iQ, at King’s Manor business park, to deliver their latest 800 bed-spaces. Construction commences in late 2019 and the resulting facilities will be available to students of Northumbria and Newcastle universities. Newcastle has additionally seen many new developments in different pockets of the city, over the last five years, including two Vita schemes developed on sites originally earmarked as city centre office developments, and a number of developments adjacent to Newcastle Helix, and also in the east of the city, in the Shieldfield area.

Durham also has a strong university and private PBSA market. Our team is working as technical advisor to the university itself, on a complex city centre site at Leazes Road on the banks of the River Wear. This is a highly sensitive site in planning, design and conservation terms.  Our team is working closely with the university and design team to de-risk the site in planning terms, and to develop the business case prior to a competitive dialogue process to select a DBFO partner. 

In Durham we are also supporting a private investor in the conversion and part new build of the former Three Tuns Hotel on New Elvet, to create 168 student beds-spaces. Our cost management and employer’s agent role will help our client navigate the challenges of development in a UNESCO World Heritage site setting, and ensure project delivery within the required parameters to generate their desired commercial returns.

These are just a few of the student accommodation projects on which SNC-Lavalin’s Faithful+Gould business is currently engaged. We have a detailed understanding of this market, underpinned by many years’ experience of delivering 11,000 bed-spaces across a wide variety of provision for both HEIs and private accommodation developers.

Our services include feasibility studies around design, development and delivery options; project management; cost management; development management, building surveying, contract administration and health & safety supervision.