A study by JLL’s Higher Education team has charted the rise of student housing partnerships between private sector operators and universities in the UK.
Claiming to be the first to pull together comprehensive information on the student housing market, the study highlights the c. 27,000 new beds that these partnerships have created in the last 15 years, and the further c. 16,500 beds transferred from university portfolios.
These partnerships have so far attracted £2.4 billion in capital investment and the number of partners has tripled in the last decade.
Robert Kingham, director in the management company’s Higher Education team, said: “As a market, the sector is maturing, evolving, and becoming more sophisticated. The scale of the challenge is huge. Universities own or lease a quarter of a million beds in the UK and we estimate that upwards of £5 billion is required to address their quality, in addition to creating more beds, to improve the student experience.”
JLL predicts a particular increase in the number of Design, Build, Finance and Operate (DBFO) schemes over the next five years, whereby a student housing partner takes a long lease of university-owned land, designs a scheme in conjunction with the university, raises finance, operates, builds, and takes the risk of finding occupants. In return, universities receive the expertise of a dedicated partner, a capital receipt and continued influence over creating a high-quality student experience.
As a result, JLL expects universities who have not embarked upon this type of partnership before to look seriously at DBFO as an option.
Martin Le Grice, head of Alternative Investment at JLL, added: “There is increased funder interest in the sector. This is partly driven by the opportunities in the DBFO and the emerging Strip Income markets, and the relative stability that Purpose Built Student Accommodation (PBSA) offers. When set against the difficulty in deploying equity, it demonstrates why funders are increasingly keen to enter what is currently a relatively closed market.”
The study concluded that affordability will be a major theme for all aspects of student accommodation over the next five years. This has become a priority concern for universities given the financial pressures on students, combined with high build costs and a lack of product which is driving up rents.
The full report can be downloaded here