Is collaboration key for student accommodation success?
We all know Cambridge as synonymous with its university colleges and with that, the thousands of students that flock to the city each year.
You can’t walk down King’s Parade without passing several groups of fresh faced students, often with their nose in a book. How we accommodate students however, may be key to the sustainable success of the city. It poses the question: are we doing this as efficiently as possible?
Over the last few years there has been a dramatic increase in the number of purpose-built student accommodation rooms in Cambridge to support the sharp rise in students attending the University of Cambridge and Anglia Ruskin – some 40,000 students in total between them.
This includes schemes such as CB1 and developments under construction on the former Wests Garage, Newmarket Road as well as rooms proposed on the Cheddars Lane site.
Historically, student direct lets did not exist in Cambridge city centre; it was an asset class investors and developers just weren’t interested in, mainly because it was two risky and the two main universities in the city provided their own accommodation.
However, in 2012, Brunswick House was developed by McLaren Properties which gave students the choice to live independently in brand new accommodation in a well-connected location.
A year after it opened, McLaren sold the scheme for £26 million at a 6.25 per cent yield, which was ultimately the catalyst for the development of the city’s direct let student housing market. The quality of the stock has steadily improved due to student requirements around the size, services, and amenities that they expect, as well as the location of the accommodation.
Latterly the council has enforced design guidelines that stipulate how large rooms should be as well as the inclusion of standard services, such as managed car parking. However, there is little discussion between the student body, university, council, and developers about the types of housing stock that is required.
Notably, there has been a shift in student demand from a studio apartment to cluster accommodation. Thankfully this has started to result in the universities, when asked to consult on planning applications, recommending that studio based schemes are turned down in favour of what they term, ‘twodios’. These two-bedroom apartments provide more space and ultimately an alternative option which was previously limited by the very over crowded studio market.
Interestingly, rents have risen steadily since 2012 from £165 per week to £210 per week per bedroom. However, demand has in recent months started to taper off, which reflects the variety of choice that students have compared to a few years ago.
September 2016 was the first time that all the student accommodation was not fully let. This has resulted in investors starting to look elsewhere for investment opportunities in the city.
The real issue is that growth in the sector has driven up land values making sites more expensive to develop. This has pushed the development of student schemes to the periphery of the city e.g. North West Cambridge and the creation of ‘student villages’.
While attractive, these villages are often inhabited by the post-graduates and students enrolled in Masters and so unattractive to the undergraduate intake, which prefers to be near the town or university in a more bustling location.
It is harder to develop new schemes in the centre of town because of its historical nature but those that are close to the action and lecture halls obviously have higher rents than those further out in secluded areas, without the basic standards that the students demand and require.
Fundamentally, there is still a disconnect between the students, housing suppliers/developers and the universities. For this asset class to remain resilient the developers need to liaise with the universities to coordinate development that is off campus to ensure that it doesn’t compete so rents are all aligned and helpful for the students.
This, in turn, will provide annual rent income that the developers require and ensure the commitment from funds and investors buying and maintaining adequate student accommodation that they want and need.