London Student Accommodation Market - The Mansion Group

London Student
Accommodation Market
2009

Executive summary 1
Introduction – an investment opportunity 2
Central London student demographics 2
The universities 4
Overseas students 5
Postgraduate students 8
London developers / operators & investors 8
Private sector bed numbers and development pipeline 11
Planning environment 13
London rental market 13
Rental growth in the student accommodation sector 13
Other factors for consideration 14
Outlook and conclusion 15
King Sturge student accommodation group 16
Contacts 16

King Sturge: London Student Accommodation Market 2009
Executive summary
• There are currently approximately 250,000 full
time students in higher education in London of
which only 1.5% are able to access commercially
operated private sector accommodation; 18% of
all students in the UK study in London.
• London student numbers are projected to
increase by 18% for overseas students and 14%
for postgraduates between 2006 and 2011.
• Commercially operated direct let accommodation
is currently trading at 99%+ occupancy.
• Average rental growth in 2008/2009 was circa
10% with further growth predicted in 2009/2010.
IPD based forecast for All UK Commercial
Property Index (student housing is not included)
dated December 2008 predicted -6.7% in 2009.
• Capital values in the sector have been remarkably
resilient in the capital when compared to the IPD
All Property Index which declined 27.1% in 2008;
this is the best performing property asset in the
UK.
• With falling residential land values of 70% and
decreasing commercial site values developers
and universities have a unique window of
opportunity to acquire land which would
otherwise be unaffordable.
• At December 2008 Sterling had depreciated by
21% against the Euro and 26% against US$ over
a 12 month period. The resulting weakness has
made the UK a more attractive proposition for
students but also for overseas investment in UK
Real Estate.
• Many Higher Education Institutions (HEIs)
struggle to provide sufficient bed spaces for first
year and overseas students.
• King Sturge predicts that between 50% and 75%
of university housing stock in London is deemed
dated by modern standards.
• HEI support is increasingly important for obtaining
planning consent and funding of private sector
schemes.
• The total development pipeline of almost 3,500
bed spaces accounts for less than 1.5% of
current full time student numbers.
• The planning framework is likely to be increasingly
restrictive, limiting the development pipeline of
new student stock.
• The traditional shared student house (House in
Multiple Occupation (HMO)) has seen strong
competition from other residential user groups.
1

King Sturge: London Student Accommodation Market 2009
Introduction – an investment
opportunity
The London market is seen as the key investment
opportunity for specialist developers, operators and
investors in the sector of student accommodation.
There is a major demand / supply imbalance of
private sector student accommodation which is
set to continue in the medium term. The current
economic and credit turmoil in the global economy
will exacerbate this problem over the medium term
as development activity eases and student numbers
increase.
and King Sturge predicts more strategic alliances
with key operators with new overseas and existing
investors. In this paper we provide an overview of
the London market and discuss a number of the
main factors influencing the market currently.
“As options for students continue
to increase globally, if London is to
remain competitive, then there is an
urgent need for additional good quality
accommodation”
Paddy Jackman, Imperial College, London
Central London student
demographics
The map, above right, illustrates the Bloomsbury/
Mid Town dominance of a high concentration of
HEIs which has been a key focus for private sector
investors who seek accessibility to a significant
proportion of London students.
Woburn Place – Unite Group plc
London represents a significant market with nearly
250,000 full time students. Yet the university and
private sector only provide accommodation for
17% of full time students currently. This presents
a considerable opportunity for developers and
operators to provide accommodation to the 80%
who cannot obtain either university or private sector
accommodation and therefore reside in Houses
in Multiple Occupation (HMOs) or live with their
parents.
Private sector development to date has principally
been focused on the area identified on the map
with only a relatively limited number of housing
association style investment deals across the
wider area. There remain key opportunities with
universities through strategic relationships directly
with the HEI.
Historically there has been a tendency for developers
to seek leases or nomination agreements on
their accommodation. This was due to the added
security provided for private sector schemes for a
guaranteed rental income stream. However, over
recent years more operators seek to directly let
their accommodation to students to take benefit of
the greater rental growth prospects. It is this rental
growth that is still projected over the foreseeable
future and the reason that the sector stands out as
an investment opportunity. Barriers to entry are high
Three Colts Lane – Hive Student Residences
Undergraduate and postgraduate student
numbers
London has more students than any other single
location in the UK with approximately 250,000
2

London Contemporary Dance School
Conservatoire for Dance and Drama
Central School of
Speech and Drama
Royal Academy of Music
Royal College of
Nursing Institute
University of the Arts
Imperial
College
Heythrop
College
London Business School
The Institute of
Cancer Research
Royal College
of Art
Royal College
of Music
London Metropolitan University
Royal Veterinary College
Kings College London
Courtald Institute of Art
Chelsea College of
Art and Design
City University
Central School
of Ballet
London School
of Economics
Guildhall School of
Music and Drama
London South Bank University
London College
of Communication
Queen Mary College
University College of London
Royal Academy
of Dramatic Arts
Birbeck, University of London
London School of Hygiene
and Tropical Medicine
University of Westminster
London College of Fashion
Trinity Laban College of Music
Goldsmith College
University of Greenwich
School of
Pharmacy
Institute of Education
School of Oriental
and African Studies
University of London
Central Saint Martin
College of Art and Design
University of
East London
King Sturge, 2009
Total undergraduate and postgraduate students
30000 Total UG FT & PT
Total PG FT & PT
25000
*University of London
20000
15000
10000
5000
0
Birkbeck College*
Brunel University
Central School of Speech and Drama*
The City University
Conservatoire for Dance and Drama
Courtauld Institute of Art*
The University of East London
Goldsmiths College*
The University of Greenwich
Guildhall School of Music and Drama
Heythrop college*
Imperial College
The Institute of Cancer Research*
Institute of Education*
King's College London*
Kingston University
University of the Arts, London
London Business School*
London Met University
London South Bank University
LSE*
London School of Hygiene and Tropical Medicine*
Middlesex University
Queen Mary and Westfield College*
Ravensbourne College of Design and Communication
Roehampton University
Rose Bruford College
Royal Academy of Music*
Royal College of Art
Royal College of Music
The Royal College of Nursing
The Royal Veterinary College*
St George's Hospital Medical School*
St Mary's University College
SOAS*
The School of Pharmacy*
Thames Valley university
Trinity Laban
University College London*
The University of Westminster
Source: HESA data 2006/07 interpreted by King Sturge
3

King Sturge: London Student Accommodation Market 2009
full time students and a total of 41 HEIs including
the University of London which itself is made up
of 19 institutions (18 of which are located within
London).
The main London institutions are listed in the table
on the previous page and we illustrate the number
of full and part time students with reference to both
undergraduate and postgraduate study.
Out of 41 HEIs, 16 educate in excess of 15,000
students across the whole metropolitan area.
Of particular relevance is the proportion of
postgraduate numbers at these centres, and it
is these students that universities are keen to
increase. Postgraduate students participate
particulary on 12 month study programmes and
for whom bespoke accommodation options are
extremely limited.
The universities
Main universities
Earlier in this paper we listed the main universities
within London. In the table below we show the top
20 universities which are ranked within The Times
Good University Guide 2009.
London
Rank
UK
Rank
University
1 3
Imperial College of Science, Technology
and Medicine
2 4 London School of Economics 1
3 7 University College London 1
4 11 King’s College London 1
5 24 School of Oriental and African Studies 1
6 30
Royal Holloway and Bedford New
College 1
7 37 Queen Mary and Westfield College 1
8 46 Goldsmith College 1
9 50 The City University
10 52 Brunel University
11 75 University of the Arts, London
12 86 Roehampton University
13 93 Kingston University
14 101 The University of Westminster
15 105 Middlesex University
16 109 The University of East London
17 110 University of Greenwich
18 112 Thames Valley University
19 113 London South Bank University
20 N/A London Metropolitan University
1. Denotes a college of the University of London.
University positioning in ranking systems is a key
indicator of the institution’s academic reputation
Applicants per place for overseas and mature students
60
50
13.4
Overseas students Mature students Applicants per place
14
12
40
30
20
6.3
8.7
9.6
6.5
5.5
6.7
5.9
7.9
7.0
4.7
4.1
5.5
5.0
7.3
4.1
6.6
4.2
4.8
7.1
10
8
6
4
10
2
0
Imperial College of Science,
Technology and Medicine
London School of Economics
University College London
King's College London
School of Oriental and
African Studies
Royal Holloway and
Bedford New College
Queen Mary and
Westfield College
Goldsmith College
The City University
Brunel University
University of the Arts, London
Roehampton University
Kingston University
The University of Westminster
Middlesex University
The University of East London
University of Greenwich
Thames Valley University
London South Bank University
London Metropolitan University
0
Source: King Sturge 2009 / HESA interpreted by King Sturge
4

together with other performance criteria. It is
rankings such as Times Higher Education (THE) that
strongly influence a student’s choice over rivals.
As is clearly illustrated London’s HEIs average 6.5
applicants for every university place which is a
healthy level.
World rankings of London universities
In addition to a strong domestic performance
London is home to five universities which are ranked
within the THE World’s Top 200 Universities 2008.
The table below shows the London universities and
their rankings:
University 2008 2007
Imperial College, London 6 5
University College, London 7 9
King’s College, London 22 24
London School of Economics 66 59
Queen Mary, University of London 160 149
Source: The World Top 200 universities 2007 - 2008
Universities within the World Top 200 list attract
significant numbers of overseas students wishing to
study at a highly acclaimed institution and is another
reason why this global centre is so popular against
other Anglophone destinations. As can be seen the
London universities have slipped slightly down the
league from last year. The main US institutions have
seen the most progress up the rankings. According
to Organisation for Economic Co-operation and
Development (OECD) spending on HE in the UK as
a proportion of GDP is below average and roughly
half the US. At the same time the OECD state that
with the weak Sterling British universities should
benefit from an increase in student numbers against
other Anglophone systems.
Overseas students
Projected numbers of overseas students
The graph below shows the number of projected
overseas students in the UK. Specific London data
is not available but it is anticipated that a large
proportion of these students will study in London.
Projected increase of international students from 2007/08
Percentage increase in students
25%
20%
15%
10%
5%
0%
3.30%
5.10%
2007-08
4.30%
7.13%
2008-09
2009-10
2010-11
Undergraduates Postgraduate taught Postgraduate research
Source: HEFCE 21st January 2008 interpreted by King Sturge
6.08%
5.92%
The graph above shows the projected numbers of undergraduate
and postgraduate overseas students up to the 2010/2011
academic year together with the annual projected percentage
increase from the 2007 figures.
13.89%
10.97%
10.66%
19.36%
15.18%
15.05%
CGI Imperial College’s new Eastside building
Top locations for international students
41-65 Three Colts Lane – Hive Student Residences
The graph on the next page shows United Nations
Education, Scientific and Cultural Organisation
(UNESCO) data which illustrates the top six
international locations for students to study in. The
United States is the most popular choice for students
followed by the UK and then France. According to
i-Graduate the UK has now overtaken the US as
the most popular study location for international
5

King Sturge: London Student Accommodation Market 2009
students. The popularity of the UK as a foreign
destination for students is of great importance. This
means that the UK is a global leader in the provision
of education to citizens of other countries.
UNESCO does not have specific London data
available but we anticipate that a large proportion
of students choose London as their favoured
destination due to the number and quality of
institutions available. Research undertaken by
i-Graduate found that qualifications from UK
universities are, alongside those from the USA,
considered to be the world’s best, which contributes
to the popularity of the UK as a foreign destination
to study in.
British Council predict continued growth in Indian
students travelling to the UK. The projected rise in
Indian students will help to increase the number
of overseas students in the UK and as a result
will place further pressure on the limited student
accommodation available.
Top 6 international student destinations
Russian Fed.
5%
South Africa
4%
Japan
9%
United States
42%
France
17%
United Kingdom
23%
Source: UNESCO – 2006/2007 interpreted by King Sturge
“Study London” state that over 90,000 overseas
students study in London from over 200 different
countries. They advise that as at 2006/2007 the top
three countries were China (7,865 students), United
States (5,615 students) and India (5,265 students).
Study London advises that the number of overseas
students are increasing year on year and there has
also been a rise in US study abroad programmes
since the 2001/2002 academic year which are not
accounted for in these figures as is the case with
the huge number of summer language courses
offered.
Indian students are also recognising the UK as
a popular place to study due to the quality of the
education available. The British Council have found
that wealthy Indian students who are unable to
get into their own high quality universities look to
the UK universities to provide their education. The
Piccadilly Court, London - Unite Group plc
The British Council Vision 2020 forecasts global
demand continuing to rise. The increasing number
of overseas students further enhances demand for
student accommodation within London. Overseas
students also require accommodation often for
relatively short periods. Study London states that
52% of US study abroad students stay for less
than eight weeks, 5.5% stay for the full academic
year and 37% stay in London for a semester. Study
abroad figures are usually not accounted for in the
numbers of overseas students due to the short
periods of time they are in the UK. Demand for
flexible accommodation is heightened as these
students also require accommodation.
Who is living in the halls
The graph, above right, shows the nationalities of
students for the direct let accommodation at the
6

Nido Kings Cross scheme. As is clearly illustrated
the domestic market accounts for a relatively small
proportion of overall numbers. Overseas students
are confident in their preference to book ‘branded’
commercial accommodation rather than trawl the
HMO sector with the orientation and language
issues they would face.
Nido Kings Cross student demographics 2008/2009
30%
25%
20%
15%
10%
5%
0%
25%
23%
US
UK
Source: Nido
7%
India
5% 5% 4% 4%
3% 3% 3%
2% 2%
1% 1% 1%
China
Greece
Spain
Canada
Italy
Cyprus
Pakistan
The Prime Minister’s Initiative
In addition to the above the Prime Minister’s
Initiative for International Education is a five year
strategy created to secure the UK’s position as a
top provider of international education. It sets out
a number of targets which are to be achieved by
2011. The main targets are:
• Achieve an additional 70,000 international (non-
EU) students in UK higher education and 30,000
in further education.
• Double the number of countries sending more
than 10,000 students per year to the UK.
• Achieve significant growth in the number
of partnerships between the UK and other
countries.
• Improve the student satisfaction ratings in the
UK.
It is anticipated that the Initiative will aid further
increases in numbers of students coming to study
in the UK. It should also assist in maintaining the UK
as a top location where students choose to study.
Overseas students’ spend
Whilst the principle focus of this report has been on
the supply and demand imbalance of bed spaces
in the London market it is important to consider
France
Turkey
Brazil
Germany
Russia
11%
Other
the fact that a lot of this demand is fuelled by EU
and non EU students. Under current university
financing provision EU and UK students essentially
cost universities more than the tuition fees and
HEFCE funding they receive. It is principally for
this reason that all universities are keen to drive
their international recruitment which has been
recognised by the Mayor’s Office. In addition to
the direct revenue benefits to the universities
we must also consider the net gain to the British
economy. As we have conveyed in this report the
importance of good quality accommodation is vital
for the future of London as a global destination for
both the universities and the economy. EU and non
EU students add to the UK economy by spending
money on tuition fees, accommodation fees and
general living costs.
The Higher Education Policy Institute (HEPI) in their
report dated July 2007 examined the economic
costs and benefits of international students. The
HEPI have calculated that the UK benefits from
approximately £3.3bn of net direct cash from fee
income and living expenses from non EU students
alone. There are no specific numbers quoted for
London but we conservatively estimate this amount
to be between £600m and £1bn per annum. This
calculation ignores EU non UK students and post
graduate employment from both groups. As an
important revenue source for universities and
London, additional investment is required at both
academic but mainly residential level to ensure the
‘overall’ package is attractive to the competition.
As detailed earlier, i-Graduate states that the UK
is now the most popular destination for overseas
students even though it is perceived as the most
expensive location. Market research undertaken by
i-Graduate in its Student Pulse survey 2007 found
that two-thirds of students select the university first
before thinking about which country they will study
in. The research concluded that even though the
cost of tuition and cost of living was the number
one concern for prospective students, the UK has
maintained its appeal by scoring highly on teaching
and research, quality reputation of qualifications
and security. Overseas students perceive their
education as an investment for their future. London
has a large number of highly rated institutions which
attract overseas students.
7

King Sturge: London Student Accommodation Market 2009
to study in. Postgraduates also vary in that they
often prefer to remain in the accommodation for
longer tenancy periods. In London private sector
accommodation is often provided for 51 week
tenancies which suits postgraduate students.
However, in the more fringe London locations
and regions it is common for tenancy lengths
to be shorter and this often is less preferable for
postgraduate students.
Opal 1 London, Pitfield Street
Postgraduate students
Projected number of postgraduate students
Study London predicts that the numbers of
postgraduate students will continue to increase in
the future. Postgraduate student numbers have
been rising nationally over the past few years and
the UK projections show a further increase as
demonstrated in the graph below:
Projected full time postgraduate student numbers - UK
Full time postgraduate students
210,000
205,000
200,000
195,000
190,000
185,000
180,000
175,000
170,000
165,000
160,000
2006-07
2007-08
2008-09
2009-10
Academic year
Source: HEFCE 21st January 2008 interpreted by King Sturge
2010-11
The rise in postgraduate and overseas students
will place additional pressure on student
accommodation within London.
Postgraduate students’ requirements
As shown above the numbers of postgraduate
students have been rising and are forecast to
continue increasing over the next few years.
Postgraduate students often prefer studio flat
accommodation as well as the option for family
accommodation. Postgraduate students are less
likely to opt for large cluster flat type accommodation
as they prefer their own space and quiet areas
“There is a significant challenge for
all institutions in ensuring that their
accommodation meets the needs of
students especially in urban environments.
Our sale of a significant proportion of our
accommodation to Liberty this summer,
started the process of meeting this
challenge and in a second phase we are
seeking to re-develop the remaining halls
with a commercial partner.”
Frank Toop, City University
London developers / operators &
investors
Direct let accommodation
There are currently a limited number of operators
who have student accommodation schemes within
London. We provide in the table and graph below
the top five operators and developers for direct let
schemes which are operational at the current time.
Top 5 direct let operators in London
Liberty
Living
343 10%
IES
302 9%
Nido
600 18%
Source: King Sturge 2009
UCT
252 8%
Unite Group plc
1,853 55%
The top three direct let operators and developers
in the market are the Unite Group, Nido and Liberty
8

Living. The figures in the pie chart above only include
direct let bed spaces. Where there are schemes
which are partially direct let or leased, we have only
included the direct let bed spaces above.
The private sector provides 3,611 bedrooms in
direct let accommodation within London and an
additional 3,251 bedrooms which are held under
nomination agreements and leases. The direct
let and accommodation held on agreements each
represent just over 1% of full time student numbers
respectively.
University accommodation provision
The chart below shows the current provision of
bedrooms each university in London provides. The
table illustrates how the universities combined can
only provide accommodation for 15.5% of their
students.
Provision of beds %
40%
35%
30%
Quality of university residential
accommodation
University provided accommodation is generally
considered to be in poor condition nationally
with around 25% of the non-residential estate
having been built before 1940. In the last few
years, universities have recognised that student
accommodation is a key component in the overall
lifestyle choices students make when choosing a
university. There is a growing recognition among
universities that students do have choice and that
the universities need a product that is attractive to
prospective students.
If HEIs are to attract international students there
will be pressure on them to provide a range of
accommodation for all budgets. With pressure on
funding on core academic estates the role of the
private sector comes to the fore. In addition to this is
the pressure on them to cater for the latent demand
from first year undergraduates and are often unable
to meet these applicants and so must restrict the
criteria for eligibility.
25%
20%
15%
10%
5%
0%
Brunel University
The City University
The University of East London
The University of Greenwich
Guildhall School of Music and Drama
Imperial College of Science,
Technology and Medicine
Kingston University
University of the Arts, London
London Metropolitan University
London South Bank University
Middlesex University
University of London
All Colleges Combined
Ravensbourne College of
Design and Communication
Roehampton University
St Mary's University College,
Twickenham
Trinity Laban
Thames Valley University
The University of Westminster
Source: King Sturge 2009
The above chart does not include the Conservatoire
for Dance and Drama, Rose Bruford College, Royal
College of Art, Royal College of Music and The
Royal College of Nursing as these colleges do not
provide any accommodation for their students.
Brunel University provides the greatest number
of bedrooms with nearly 40% of students being
housed in university accommodation. The chart
shows the low provision of bedrooms to students
by universities. The shortfall is made up within the
small proportion of private sector accommodation
and the remainder is in HMOs or students live with
their parents.
CGI Nido, Spitalfields
9

King Sturge: London Student Accommodation Market 2009
The provision of accommodation is not only a means
of attracting students to study at the university but
also to ensure that they are integrated into the
ethos of the university and the pastoral care that
comes with it and to help reduce first year drop out
rates. The London School of Economics (LSE) has
undertaken a survey and found that if a first year
student is not offered a place in a residence then
18% of those offered a place will decline to attend
that university.
“With pressure on first year
accommodation provision, second and
third year undergraduates as well as
postgraduates form a large gap in the
market”
This is very relevant given that most London
universities are set to increase student numbers
over the next five to ten years by the region of
5% per annum to cope with the government’s
commitment to have 50% of school leavers
entering higher education. London universities
are typically over-subscribed by applications from
new students and they will struggle to attract their
preferred candidates if they are unable to provide
suitable accommodation.
Nido King’s Cross
As mentioned above, some universities have to
restrict an offer of a place in a hall of residence to
those that live outside a certain travel distance from
the campus. This does not help the university obtain
its target for “widening participation” and where
the government sets targets for social inclusion.
Living away from home is a major component of the
HE experience and some HEIs are of the opinion
that those students not offered a place in a hall of
residence do not get the full benefit of all that the
university has to offer, including integrating fully
with other students.
With pressure on first year accommodation
provision, second and third year undergraduates
as well as postgraduates form a large gap in the
market.
University strategies
With an established market for student
accommodation, University finance directors now
have the option of raising capital sums from non-core
residential assets for reinvestment in residences
or capital expenditure in the academic estate. The
strengthening student accommodation market over
the last two years has meant that many universities
own increasingly valuable assets.
While there remains considerable sensitivity about
any potential on-campus sales, off-campus disposals
are increasingly being considered, albeit with a
requirement for the accommodation to be made
available to the university’s students and sometimes
with a requirement for the accommodation to be
upgraded.
King Sturge is working with several universities
who are considering strategic partnerships with
developer-operators to transfer their accommodation
by way of the grant of a 30-35 year interest or creation
of an SPV. These partnerships can be created for
both the refurbishment of existing accommodation
and/or the development of new, high standard
accommodation. Alternatively, there are also a
number of innovative finance solutions available
for universities to generate capital premiums from
student accommodation income streams.
Summary of accommodation provision
The pie chart opposite illustrates the imbalance in
supply of accommodation from the university and
private commercial operators. In excess of 80% of
students are unable to secure hall accommodation.
When looking at the private sector in isolation less
than 2% of full time students currently access direct
10

let bed spaces compared to the university provision
of 38,500 beds. The majority of privately owned
accommodation in London is subject to leases or
nomination agreements and therefore not available
as direct let accommodation to the London market
City University
Following an OJEU process for the provision of
professional services in late 2006, King Sturge
completed a feasibility review into the potential
options to dispose of City University’s halls of
residence. The residential estate comprises
almost 1,000 beds situated on three sites in
close proximity to City University’s Northampton
Square academic buildings. Our initial
involvement included preparing a residential
strategy report which was presented to the
University board in May 2007. This consultancy
included a comprehensive programme of
interviews of key stakeholders in the University
including the student union, deans of faculties
and the Vice Chancellor. The residential strategy
evaluated potential options for the halls of
residence including disposal, sale and lease back
or creation of a public private partnership.
We have been advising the University on
procurement options for the redevelopment of its
main residential site which includes integrating
with planners and architects to define the concept
of development for the new accommodation.
We have now also been appointed to market the
portfolio.
The portfolio is split across three sites. The first
stage of the transaction closed in August 2008
and involved the disposal of a 125 year long
leasehold interest in two operational properties
which were sold to Liberty Living for over £39
million. King Sturge is now advising the University
on its options for disposal of the third site. This
site, being the largest of the three with almost
500 beds, is not fit for purpose and is ripe for
redevelopment. The redevelopment of this site
is a key issue for the University in the transaction
and the new development will help improve the
quality of residential accommodation on offer to
students at City University.
(these schemes are included as part of the University
provided accommodation). A total of 42,000 (17%)
of students can access purpose built university or
private sector accommodation, which indicates that
206,000 (83%) of students must rely on obtaining
accommodation elsewhere. This shortfall is broadly
made up from either Houses in Multiple Occupation
(HMOs) or from students living with parents.
London student accommodation analysis
London universities
Direct let private
sector operators
Other (students resident “at home” or in HMOs)
Source: King Sturge 2009
The amount of accommodation in the development
pipeline will help to a certain degree but only
marginally as the growth in numbers over the short
term is outstripping supply. This problem will be
exacerbated with the lack of real estate investment
due to the current economic and financial
turbulence.
CGI Opal 4, Tufnell Park, London
Private sector bed numbers and
development pipeline
The provision of commercially-operated beds
has grown slowly over the last few years. The
proportion of students living in Houses in Multiple
Occupation has remained relatively stable, whilst
the number of students living with parents has
increased nationally.
11

King Sturge: London Student Accommodation Market 2009
Pipeline schemes under construction
The total number of bedrooms under construction is
less than 2% of current full time student numbers.
50% are due to be delivered for the start of the
2009/2010 academic year and 50% in time for the
start of the 2010/2011 academic year.
Pipeline schemes with planning consent
a refurbishment of former office accommodation.
A further project is due to complete in 2010,
comprising a 1,350 bed, 32 storey development
at Spitalfields, which is under construction. The
Nido brand is particularly focused on the overseas
student market and they intend to offer flexible
short-term lets, in addition to the more traditional
40-50 week let.
Pipeline bedspaces
Number of beds
4000
3500
3000
2500
2000
1500
1000
500
Under construction
Consent granted
We have already summarised the current provision
of private sector direct let accommodation but there
are a number of other recongised ‘players’ either on
site or with schemes on the horizon including Hive,
Opal, the iQ fund, Ely and Victoria Hall.
“In the UK there is only one place to be”
0
2009
Source: King Sturge 2009
2010
2011
2012
There are a further 13 purpose-built student
schemes accounting for less than 3,500 bedrooms
that have secured planning consent but are not yet
under construction. The chart below shows the
pipeline schemes that are under construction and
those with planning consent that are to be delivered
each academic year.
The chart (above) demonstrates that the majority
of schemes which have secured planning consent
are due to be delivered in time for the start of
the 2010/2011 academic year. We have seen an
increase in sites being put forward for student use
particularly during the latter half of 2007 onwards,
as the commercial markets have softened. Whilst
the number of planning applications has increased
only circa 10% of schemes have an implementable
consent and even they are facing funding issues.
The planning environment is predicated to harden
considerably looking forward.
Perhaps one of the most dramatic new entrants to
the market has been the overseas investors. King
Sturge has been advising a number of new entrants
to the market such as Blackstone on its Nido brand.
Commencing in 2004 with a major new £95 million
development (now completed, at King’s Cross, of
846 studios, providing accommodation for over
1,000 students). The scheme was developed as
Pipeline by London borough
The pie chart (below) shows the pipeline schemes
which are under construction together with those
which have secured planning consent by London
borough.
Pipeline schemes by London borough
City 2%
Hackney 3%
Greenwich 2%
Wembley 9%
Camden 10%
Source: King Sturge 2009
Haringey 9%
Southwark 8%
Islington 27%
Tower Hamlets 30%
The chart demonstrates that Tower Hamlets has
the largest number of bedrooms in the pipeline
followed by Islington and Camden. This is partially
due to some of the larger schemes being within
locations such as Nido Spitalfields which is a 1,204
bed development in Tower Hamlets. The pie chart
includes pipeline schemes under construction
together with those which have secured planning
consent but are not yet under construction.
In addition to the above schemes we are aware of
12

a further circa 3,800 bedrooms which are currently
going through the planning process. With the
planning environment becoming more restrictive
(discussed further in the following section) we
consider that only a fraction of these schemes will
obtain planning consent.
Generally the planning environment within London
appears to be more restrictive overall. Some London
boroughs are taking a tougher stance in giving
student accommodation consents, particularly
those which have been subject to a high proportion
of student schemes. There is generally a lack of
consistency between London boroughs which
means policies varies between each borough and
at City Hall level.
London rental market
CGI: Wakely Street, London - Infrastructure Investments
Planning environment
In the current economic climate, student
accommodation has been viewed as a good
alternative to other commercial sectors. As a result
of this the number of planning applications made for
student accommodation has increased significantly.
However, the number actually getting planning
consent is very limited .
The London planning environment is predicted to
become more restrictive going forward. In addition
to this, some London boroughs are seeking
to restrict the number of planning applications
obtaining approval for student accommodation. We
understand that some boroughs are considering the
introduction of an affordable housing provision and /
or rent controls for student schemes going forward.
We have recently seen the first student scheme
subject to an offsite affordable housing provision in
Camden.
Should there be an increase in the adoption of
affordable housing provision together with rent
controls, this will seriously impact on the viability of
future schemes.
Recent research undertaken by accommodationforstudents.com
showed that the availability of
accommodation for students has been reduced
as many former student landlords are now renting
their accommodation to young professionals who
can no longer afford to buy properties due to the
financial crisis. Residential values have been falling
as well as the availability of mortgages so young
professionals and graduates who previously were
looking to buy property are now adopting the “wait
and see” approach and renting in the interim. This
further restricts the supply of available student
accommodation.
Another factor which is pushing the rental market
in London is the decrease in the number of parents
purchasing properties for their children. Partly due
to the significant decrease in mortgage availability
together with lower loan to value requirements.
Rental growth in the student
accommodation sector
Rental growth across the UK student
accommodation sector has been dramatic over
the last few years. This in part has reflected the
higher specification of new developments and a
tendency for operators to focus on the premium
end of the market, which incorporates a high level
of associated hospitality services.
Within London, due to demand consistently
outstripping supply, rents are growing in excess of
10% per annum. This trend looks set to continue,
at least in the short term. Early indications are
that accommodation across London will see price
13

King Sturge: London Student Accommodation Market 2009
Other factors for consideration
Tuition fees
International students pay high levels of tuition
fees. The income from tuition fees paid by
undergraduate and postgraduate students from
non-EU countries in London was £492 million in
the 2006/2007 academic year according to HESA.
At the current time EU undergraduate tuition fees
are capped at £3,000 per annum. Some universities
are keen to increase this cap to £8,000 per annum.
However, it is feared that some students would not
be able to afford this increase. Also, it is a concern
that the current subsidy which poorer students
obtain would not continue if the fees rose to this
level. The Higher Education Policy Institute (HEPI)
report says that increasing fees by up to £4,000
would hit the poorest students hardest. HEPI
consider that as a result universities may have
to waive poorer students’ fees. The HEPI report
comes ahead of the planned review of the system
of university funding and student support in 2009.
HMO licensing
Charles Morton Court, London - Unite Group plc
increases of approximately 10% for the 2009/2010
academic year and lettings have commenced
strongly at these levels.
Private residential rental market sector
The Association of Residential Letting Agents
(ARLA) states that over the last three months there
has been a rise of almost 20% in new tenancies.
The rise in demand is partially a result of an
increase in rental returns which rose by 4.8% to
4.9% for houses and flats across the UK. More
properties are becoming available to rent as they
are more difficult to sell at the moment. Investment
landlords are adopting a “wait and see” approach
to see if property prices will continue to fall before
purchasing.
The traditional student housing option of terraced
HMOs now needs to comply with HMO legislation
relating to safety, minimum sizes and security.
The market anticipates that this legislation may
eventually result in many such properties being
withdrawn from student use. We are of the opinion
that this will assist the purpose-built operators
over the longer term. It is our understanding that a
commercially operated hall will not require licensing
provided that the operators sign up to a Code of
Conduct. The licensing of HMO stock will reduce
the amount of HMO accommodation available
for students. HMO’s have typically provided
accommodation to students who have been unable
to obtain university provided accommodation or
from the private commercial sector. As shown the
numbers of students are predicted to increase in
London going forward but the planning process is
restricting the numbers of private schemes being
granted consent. Therefore, the pressure will
increase on the HMO stock. If the HMO licensing
results in the stock being reduced this will put even
greater pressure on the available accommodation.
14

‘Studentification’
The Department for Communities and Local
Government has recently published a paper
focusing on the issues of
“studentification” in areas where high
concentrations of HMOs cluster together. These
‘unmanaged’ areas create friction with the local
residents and issues such as crime and deprivation
during the holiday periods when large areas are
vacated becoming “ghost towns”. The Government
is discussing ways to reduce the clustering of
student houses in this way through potentially
making planning laws tighter to allow councils
to determine their frequency in any area. The
National Union of Students has concerns that these
restrictions will discourage landlords from entering
the HMO market. This in turn will place greater
pressure on the existing private sector housing
stock. Whilst not the sole option, managed student
accommodation must have a significant role to play
for a number of reasons.
“The currency really does help us. when
we were at $2 to the £1, the total cost of
coming to the LSE and living in London
was really bumping up against the price of
Columbia and Princeton, places that we see
as our direct competitors”
Sir Howard Davies, London School of Economics
Sterling depreciation
As we have demonstrated throughout this report,
the international student market forms a major
dominant part of demand for accommodation in
London. Whilst the UK is fairing well this mobile
population has a number of alternatives such as the
US, Australia and Europe and whilst the education
offered is a major factor in a student’s choice so
too is the cost. In December 2007 Sterling was
trading at a 27 year high of more than US$2 to £1.
Over the intervening 12 month period we have
seen a 26% depreciation in Sterling against the
US Dollar. Over the same time frame, whilst not
at record highs, Sterling into Euro has fallen to a
record low, down 21%. In real terms therefore the
UK market is significantly more affordable than the
alternatives and we predict that there should be a
real short term gain in student numbers. Not only is
this good for the overseas student occupiers, it also
represents an added benefit to overseas investors
to purchase UK real estate at a time when Sterling
is under priced against leading currencies, when
most commentators expect a price correction in
Sterling’s favour.
Exchange rates
2.50
2.000
1.50
1.00
0.50
0.00
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Sterling - Dollar Sterling - Euro Dollar - Euro
Source: ONS, Experian
Outlook and conclusion
London represents a significant potential market
for developers and operators at the current time.
To conclude this report it is our opinion that
the continued and projected growth in student
numbers, both domestic and foreign, coupled with
a tough planning and funding environment point to
a continued imbalance of supply and demand. It
is this simple supply and demand imbalance that
points to pent up rental growth projections and
therefore the attraction versus other commercial
and residential investment opportunities.
IQ Wave, Kingston
15

King Sturge: London Student Accommodation Market 2009
King Sturge student accommodation
group
King Sturge’s specialist student accommodation
consultancy team is the largest in the UK. King
Sturge was one of the first property consultancies
to be involved in the emerging student sector in
the early 1990s. In 2008 King Sturge advised on
over £2.5 billion of student accommodation. We
also have a track record of successful agency
transactions in the student sector. In 2008 we acted
on a sale of approximately £250m of purpose built
student accommodation throughout the UK. King
Sturge also provides advice to universities across
the UK on a wide range of student residence issues
through our market leading HE team.
Our advisory services include:
• Valuation of sites, developments and existing
schemes
• Advice on leases and nomination agreements
• Investment advice
• Specialist sector based research and
consultancy
King Sturge works with the majority of the
main operators, developers, student funds and
universities across the UK and the leading investors
in London.
The King Sturge education sector expertise
King Sturge has an established track record in the
provision of property consultancy advice to the
sector. Our advisory services include:
• Valuation
• Estate strategy
• Agency – acquisition & disposal
• PFI/PPP advice
• Planning
• Funding and capital applications
In addition, King Sturge Building Consultancy
provides a range of services to the sector
including:
• Project management
• Fund monitoring
• Due diligence
• Feasibility studies
• Building surveys
• High planned maintenance/life cycle costing
advice
Contacts
Philip Hillman, Partner
Tel: 07831 744 160
philip.hillman@kingsturge.com
Huw Forrest, Partner
Tel: 07967 702 880
huw.forrest@kingsturge.com
Richard Taylerson, Partner
Tel: 07977 007 102
richard.taylerson@kingsturge.com
Tom Francis, Partner
Tel: 07771 742 552
tom.francis@kingsturge.com
Rose Denbee, Senior Surveyor
Tel: 07970 304 560
rose.denbee@kingsturge.com
All data contained in this report has been compiled by King Sturge LLP and is published for general information purposes only. While every effort has
been made to ensure the accuracy of the data and other material contained in this report, King Sturge LLP does not accept any liability (whether in
contract, tort or otherwise) to any person for any loss or damage suffered as a result of any errors or omissions. The information, opinions and forecasts
set out in the report should not be relied upon to replace professional advice on specific matters, and no responsibility for loss occasioned to any person
acting, or refraining from acting, as a result of any material in this publication can be accepted by King Sturge LLP.
© King Sturge LLP January 2009
This publication is printed on recycled, post-consumer fibre, totally chlorine free paper produced from sustainable stock. FSC certification.
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