Vita Student was formed in 2012 by the CEO of specialist investment company Select Property, Mark Stott, and Chris Oakes from upmarket housing developer Huntsmere. We currently have eight student residences across the UK – one already in Liverpool that is already in operation and seven more under construction – in popular Russell Group university cities such as Manchester, Liverpool, Southampton, Exeter and Bristol. We will be completing five student developments in time for the start of the 2014/15 academic year which are worth in excess of £85 million. As an accommodation provider we are fully committed to putting students at the heart of everything we do and this resonates throughout our model – from the cities we choose, to the buildings we develop and the service we provide.
Each of our residences comprises of self-contained luxury studio apartments and state-of-the-art communal hub spaces meaning that every student has their own private living quarters as well as having access to a purpose-built social area. They have been designed to create the perfect environment for students to live and learn in and no aspect has been over-looked.
From September 2014 we will have nearly 1,000 studio apartments in operation and 65% of these have already been reserved by students for the upcoming academic year with the rest forecast to be reserved over the next nine weeks. This is indicative of the whole student accommodation sector at the moment with students increasingly turning away from the traditional ‘houses in multiple occupation’ or ‘HMOs’ as they’re known and towards purpose-built student accommodation or ‘PBSA’. As an example, the demand is Exeter is so high that our residence in the city centre there is already completely booked-up. We have also sold more than 1,200 studio apartments to investors from around the world who realise that the demand for PBSA will translate into significant rental returns. Buyers who invest in a Vita Student apartment are assured a rental return between seven and nine per cent for a set number of years.
The student property sector as a whole is structurally undersupplied in all regions which means that all the major university cities in the UK are now facing a serious supply-and-demand issue. Despite rising tuition fees the number of domestic students in the UK is still growing and the UK is the second most popular destination in the world for overseas students with numbers forecast to rise by 15 to 20 per cent over the next five years. While first-year students tend to be catered for by their university, 96% of the rest have no access to purpose-built accommodation. While students have traditionally lived in shared houses of questionable cleanliness made famous by the likes of The Young Ones, an increasing number are looking for a far more superior product so that they can escape the clutches of unscrupulous landlords and benefit from better facilities and security. Also contributing to the supply-and-demand situation is the fact that a large proportion of the older university-supplied accommodation stock is falling into disrepair and universities often don’t have access to funding that could alleviate the situation.
The surge in demand for PBSA like Vita Student isn’t just about the increasing number of students in the UK: Students are powerful consumers and their changing perception of what student accommodation should be and their desire for quality is driving the movement. For example the NUS’ recent ‘Homes fit for study’ report raised serious concerns that landlords are increasingly taking advantage of students while students themselves are becoming more attuned to this and are subsequently fighting for better standards and for the industry to become more regulated. PBSA provision provides the ideal solution to this with organisations like ANUK and The National Code ensuring that best practices and certain standards are met. The move away from HMOs is also being supported by local councils which have realised that moving students into PBSA will help to release a great deal of residential housing back onto the main stream market for local people, while bringing many abandoned buildings back into use. This will help to alleviate housing shortages which is obviously a very hot topic at the moment.
This has created the ideal conditions for the growth of the PBSA sector over the past few years as private providers have stepped up to plug the deficit of suitable accommodation. A multitude of different providers have emerged, meaning that new developments are cropping up in all the major university cities across the UK. Not only is this great news for the students but it also provides an ideal opportunity for investors looking to generate significantly higher returns than can be found through conventional investment or property assets. Indeed the sector has generated higher returns than all other traditional asset classes since 2011 according to global property consultancy Knight Frank and total annual returns are projected to remain stable from 2014 as rental growth offsets yield compression. These returns are clearly bolstered by the supply and demand situation but there is also evidence that suggest that students elect to pay significantly more for PBSA accommodation than for HMO stock. International students also have much higher expectations of what their living quarters should be like and usually have the means to pay for it. However the whole PBSA sector still only accommodates about 11% of full time students in the UK which is around 180,000 beds. This obviously leaves huge room for growth in the market, namely in cities where there are Russell Group universities or multiple institutions where the number of students looks set to increase or remain high in the future.
The UK’s academic scene is one of the country’s best attractions, meaning that international students are flocking to the UK. The government is making a concerted effort to continue this movement with David Willets, MP and Minister for Universities and Science, stating earlier this year that government policy is to encourage the predicted rise in international students and last July Vince Cable announced that the government’s plan is to attract 90,000 extra overseas students by 2018. The government’s continued support for the wider higher education sector is an important factor that will help to drive the industry forward. Obviously it isn’t just about overseas students though – we are finding that our accommodation is proving popular with both international and domestic students and there is currently a 70/30 split among our tenants for the 2014/15 academic year. Many of the UK students are third years, postgraduates and mature students, while several couples have also opted to live together in a Vita Student apartment.
Universities across the UK need to strive to maintain their competitiveness in a global race to find the best students and as part of this they have to recognise the need to provide them with a fantastic overall experience as well as the best academic qualifications. Accommodation is crucial to this; at the end of the day shared HMOs just don’t compare to private apartments which are specifically designed to aid both social interaction and academic study. Universities physically cannot keep up with the demand and so they need to start actively seeking out and supporting student accommodation providers who want to develop in their local areas. At the end of the day, if the living conditions are poor or non-existent then it doesn’t matter how highly regarded the university is, students will simply choose to study elsewhere.
It is being increasingly recognised that students are powerful consumers with high expectations and demands. Historically they haven’t been treated as such but this needs to change, not just through the quality of the accommodation but the quality of service they are provided with as well. Students now recognise the added value professionally managed high specification PBSA delivers and they are willing to pay a premium for this. The growing student body is also becoming more diverse which is will drive the need for a whole suite of accommodation types in the coming years, including luxury options. As Knight Frank has pointed out it is thought that the sector is going to echo the structure of the hotel industry, with brands and different price points emerging which target clearly defined audiences. This means that students will have a diverse range of accommodation available and will choose a brand based on the level of quality they want, from basic single rooms and shared kitchens, to specially-designed bespoke studio apartments with access to communal leisure facilities and social hubs like Vita Student. It’s also becoming clear that student demographics and the accommodation market tend to influence each other – as housing options have become more varied, students have started to demand a greater choice which in turn has caused new accommodation styles to develop, and so the cycle continues. For example, first-year students were previously happy to live in single rooms and share kitchens and bathrooms with 20 other people, whereas these days only 5% of PBSA built in the last 15 years are not en-suite, and many have private kitchenettes as well. It is natural that the sector will continue this trend and increasingly provide better and better accommodation.
PlaceEXPO Building for Education: Giles Beswick, Vita Student
Building for Education
Giles Beswick, Director at Vita