The digitalisation of study, lifelong learning and accommodation as a lifestyle service are converging to revolutionalise student accommodation, according to thinktank The Class of 2020.

Increasingly, living and learning spaces must become more flexible, more diverse and much more on demand to cater to the needs of new generations of mobile talent, Jorick Beijer, director of thinktank The Class of 2020 told delegates at its London regional event last month.

International student numbers have risen from 2 million in 2000 to 4.8 million in 2016 with predictions of a further leap to 8 million by 2025, according to research from real estate agents Savills, which hosted the London event.

Having just returned from a tour of Asia where directors of the thinktank hosted its first regional sessions in Chennai, Singapore and Hong Kong, attendees there were trying to tap into the global market of talent that is ‘footloose and looking for a lifestyle-oriented product, and are trying to balance the new live, work and learn lifestyles in meaningful ways’, Beijer said. ‘It’s a global game with lots of potential. Learning has become life-long and that is changing how we see accommodation too,’ he added.

UK leads but under pressure
In Europe, the UK remains by far the largest market for purpose-built student accommodation but that looks likely to shift as demographics change and political landscapes adjust. Paul Teulon, director of admissions and registry services at King’s College London said that although the UK was still seeing a rise in university applications from international students, acceptance rates were falling.

‘We have about 11% of the global market which is about the same as Australia. We aren’t capitalising on these growth areas,’ Teulon said.

UK universities are facing an array of challenges in the coming years. Brexit is weighing heavily on the UK and deterring investment, while income streams for many universities are dwindling especially as the government could reduce tuition fees. Among foreign students there is a feeling that they are less welcome than in the past and ‘that’s something to do with the government message’, Brian Welsh, chief executive of Nido Student, said.

Many universities are ignoring the risks that Brexit poses, said Sarah Barr Miller, head of insight at UCAS, despite their dependency on tuition fees for survival. Other challenges for the UK sector included post-study visas, she noted. ‘Universities will have to fight harder to prove their value in society in the coming years. Universities have lost sight of the importance of their value. Universities need to reconnect with what students want,’ said Teulon, who was part of a panel at the Class of 2020 event.

Professor Dr Maurits van Rooijen, who has worked in higher education for several decades in both the UK and the Netherlands, said Australia had just overtaken the UK in terms of international student numbers, adding that it wouldn’t be long before the Netherlands overtook Britain too. ‘The triple helix of university, industry and government has been broken. Something has gone wrong here and the UK is failing to attract and then keep talent,’ he said.

English-taught courses
The picture is very different in continental Europe, however, where English-taught programmes (ETPs) have accelerated international student growth. A rise in ETPs aimed at attracting and retaining domestic as well as international students continues to support near-term demand for PBSA across Europe. Germany has already exceeded its government’s target of 350,000 international students by 2020.

‘English-taught courses have really been the lynchpin in the development and internationalisation of the European student housing market. In 2009 there were around 50 ETPs but it’s reached close to 3000 in 2017,’ said Paul Tostevin, associate director of research at Savills. Some European countries are looking to cap the numbers of ETPs taught to protect their own languages but there are other opportunities in places like Spain where ‘it’s beneficial for domestic students in terms of internationalising the domestic student body’, Tostevin said.

Nonetheless, the provision of PBSA across Europe at the national level remains low. It is highest in the UK where 27% of all students can be housed, and lowest in southern Europe. In Italy, Europe’s fourth-largest student market, the national provision rate is less than 5%. Spanish cities also have very low levels of supply but high rents. Provision in Barcelona is just under 5%, while Madrid is at 5.7%, Savills research shows.

Cities performing as assets
Demographic and technological developments across the globe are transforming how cities work and in future investors and developers will need to see cities performing as assets. Factors at play range from the change in global demand and the rise of the middle classes in Asia to the shift in the balance of power in global economies.

Research suggests that with the pervasive availability of technology, younger generations want things that technology can’t provide them with such as experiences. ‘So, we are starting to see the city performing as an asset not just from the real estate point of view but as a place that attracts and retains global talent and enables face-to-face interaction that people can’t get through their devices,’ Bartlett Real Estate Institute (BREI) chairwoman Yolande Barnes told delegates.

The tough landscape to ensure capital appreciation will result in a greater emphasis on asset managers, according to research from UCL’s BREI. Asset managers who can enhance net income streams and who understand the nature of real estate depreciation and obsolescence and can counteract it will be in great demand.

If global investment asset classes are evolving to become more complex, multi-use, mixed-use buildings and neighbourhoods then the planning use classes will have to change too.
In future, as is gradually happening on a small scale, rooms and spaces won’t be leased to single tenants on a 25-year lease, nor even on an annual basis, but on an hourly, daily and weekly basis. ‘Technology will help managers to optimise the return for the full utilisation of the space,’ Barnes said.

Educating investors in the Spanish market
The potential for growth and development in the PBSA market in mainland Europe is clearly significant. But for investors and developers already operating in Southern Europe, particularly in Spain and Portugal, the development process has not always been straightforward.

Rob Waterhouse, head of investment for Europe at student housing specialist GSA, said there was a lot of educating to be done on both sides of the equation. Waterhouse said: ‘In Spain 90% of our portfolios is concession based. So that's a stumbling block that we have to get people's heads around to get them comfortable with it because it's not real estate freehold.’ He added that although there was a huge PBSA supply shortage but a massive student market, understanding the domestic positioning in Spain as well as the mobility of students was vital.

Chris Holloway, managing director of GSA Spain, said the relationship between real estate in Spain and the UK couldn’t be more different. ‘I remember somebody once saying to me that in the UK universities are knocking the door down to get the beds built. That's not the case in Spain. You've got to work on that relationship over a number of years.’

However often there is no reliance on the closeness of university relationships and ensuring municipalities are onside and happy with proposed developments and outcomes of PBSA projects.

‘On the flipside with the concessions inevitably you've got a contractual relationship already, you have to build on that and that will be used for planning purposes,’ Holloway noted. ‘They will want to tie you down to certain operational things. You have to work extremely hard to avoid things like rental caps. But we had to be very creative in the way that we presented to these initial public tenders in order to make that happen.’