Student residences: time for a partnership approach?

DOIhttps://doi.org/10.1108/JPIF-11-2019-0140
Pages128-146
Date16 March 2020
Published date16 March 2020
AuthorLaura McCann,Norman Hutchison,Alastair Adair
Student residences: time for a
partnership approach?
Laura McCann and Norman Hutchison
Business School, University of Aberdeen, Aberdeen, UK, and
Alastair Adair
Ulster University, Belfast, UK
Abstract
Purpose Recent years have witnessed significant increases in the number of undergraduate students
entering UK higher education. This increase is a result of the removal of the sector-wide cap on student
numbers in England and Wales, along with a growth in overseas students attracted by the reputation of UK
universities and the weakening of the value of Sterling. Adopting a corporate real estate perspective, the aim of
this paper is to understand how the UK student residence market is structured and financed, and to identify the
motivations that are driving the strategies adopted by the universities, private sector providers and investors
in this market. In doing so, this research seeks to test the appropriateness of the Gibler and Lindholm (2012)
model of corporate real estate strategy in the UK higher education sector.
Design/methodology/approach Data was gathered from a survey of UK university secretaries, combined
with interviews of private sector providers, bank lenders and the analysis of secondary data on investment
flows into purpose built residential accommodation (PBSA).
Findings UK university real estate strategy is mainly one of outsourcing student accommodation to reduce
costs as well as employing modern purpose-built student housingas a marketingtool and brand enhancer. This
strategy is also used as a risk mitigatory tool enabling universities to adjust to changing student demands.
Revisions to the Gibler and Lindholm (2012) model are proposed to reflect the reality of the real estate strategy
adopted by the universities. Private sector providers view the sector favourably and are set to be the main
providers of new supply over the next decade, entering into strong partnerships with the universities. While
there is evidence of some oversupply of bed spaces in certain cities, well-locateddevelopments are viewed as an
attractive lending opportunity.Since 2013there has been significant growth in institutional investment into UK
student accommodation, albeit sentiment is currently tempered by political uncertainty.
Practical implications The role of PBSA designed to meet modern student requirements is playing a
critical role not only in attracting, recruiting and retaining students but also enhancing the overall higher
education experience promoting student welfare and well-being.
Originality/value The corporate real estate strategy adopted by the UK higher education sector is an under
researched area. This paper focuses on the strategy surrounding student accommodation provision and reports
on the findings of an extensive survey of the key players in this sector. The results are of value to all
stakeholders including government and regulators, at a time when higher education is facing substantial
challenges. The evidence of a growing partnership between universities and the private sector is viewed as a
logical solution, both for the present and the foreseeable future.
Keywords Outsourcing, Higher education sector, Student accommodation, Real estate strategy,
University funding, Private sector providers
Paper type Research paper
1. Introduction
UK universities have recruited an increasing number of students in recent years. Between
2010 and 2016, Higher Education Policy Institute (HEPI) data indicated that there had been a
5.5 per cent increase in undergraduate numbers driven primarily by the removal of the cap on
student numbers introduced in 2015/2016 and partly down to demographical factors. The
recruitment of non-UK students has similarly increased not only due to the removal of the
student cap but because of the weak value of Sterling in recent years which has made study in
JPIF
38,2
128
The authors would like to thank the large number of participants in this research for their contribution.
Among others these include university secretaries and estate directors, QMPF, Real Capital Analytics,
Barclays, Bank of Ireland, Unite, Student Roost, GSA, Sanctuary Housing and Campus Life.
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1463-578X.htm
Received 1 November 2019
Revised 10 December 2019
Accepted 11 December 2019
Journal of Property Investment &
Finance
Vol. 38 No. 2, 2020
pp. 128-146
© Emerald Publishing Limited
1463-578X
DOI 10.1108/JPIF-11-2019-0140
the UK attractive to non-UK nationals, and at present almost 25 per cent of students studying
at UK universities come from a non-UK background. Combined, the increase in students
studying away from home has triggered an increase in the number of students requiring
accommodation during their studies with 27.49 per cent of students staying in purpose-built
student accommodation (PBSA) in 2017/2018. While across the UK there is presently a dip in
the number of 18 year olds in the period to 2022, the trend of increasing student numbers is
expected to continue over the next decade with the HEPI (2018) predicting growth in the
region of 300,000 to 2030 prompting the need for investment in student accommodation to
house the increasing number of students.
Whilst there has been an increase in students requiring accommodation in recent years
and an increase expected in the future, this coincides with a time of reduced government
funding in universities and uncertainty regarding tuition fee income for English universities
following the recommendation in 2019 by the Augar Review[1] to cut tuition fees for
undergraduate students from £9,250 to £7,500 per annum, with overall university sector
income protected by an increased government contribution to teaching costs. While it may be
argued that rather than invest in student accommodation directly, universities may wish to
divest their accommodation provision to a third party to allow them to concentrate on
investing in core educational activities, there is a strong counter argument that the provision
of enhanced student life/well-being concept facilities, including attractive and affordable
student accommodation is a major recruitment factor for universities. Indeed, according to
the National Union of Students (NUS, 2018), almost half of the students stated that their choice
of university was influenced by the accommodation offered. Moreover, the 20182019 Knight
Frank student accommodation survey of students indicated that 70 per cent of first year
students opted to stay in either university or private sector run PBSA, which indicates the
importance of this type of accommodation as a recruitment factor. PBSA is particularly
attractive for first year undergraduate students as the influence of university provided PBSA
has been found to lead to broader student outcomes as students enjoy enhanced social,
cultural and extra-curricular involvement in their studies (Bliming, 1993), by means of being
surrounded by similar people (age/first time away from home/studying) and the opportunity
to create strong friendships. A major selling point of student accommodation is that students
who stay in residence halls performed better in their studies, receiving higher average GPAs
than students who did not stay in residence halls (Hountras and Brandt, 2015).
Student accommodation is attractive to students as it generates an all-in lifestyle in
terms of location (accommodation being close to the university which is heralded as the
most important factor in a students choice of accommodation according to a survey of
students by Knight Frank, 2019a) and cost as accommodation fees typically include all bills
such as gas, electricity and internet. However, the ageing stock of student accommodation
owned by universities means that they need to invest in their current stock to maintain
standards and to make it attractive to new students and to be viewed as attractive as
competitor PBSA provided by the private sector (Savills, 2018b). The student population is
no longer simply looking for lodgings which only meet basic requirements but are looking
for a higher level of service and facilities. Whilst, location and cost, together with security,
continue to be fundamental in the consideration of student accommodation, the 2018/2019
Knight Frank survey indicated that for at least 9 out of 10 students, fast Wi-Fi, leisure
facilities such as an on-site gymnasium, the size of the room and the quality of the
accommodation and its furnishings were an important factor when deciding on where to
live. The importance of competitive advantage in the university sector will be discussed
further in section 2 below.
Table I illustrates the term time accommodation chosen by students between 2014 and
2018. Approximately 60 per cent of students stayed in rented accommodation, less than half
of whom stayed in PBSA and the other half in other rented accommodation. In terms of PBSA,
Partnership
approach for
student
residences
129

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