Student Accommodation in London 2013

Nigel Evans – Head of London Residential Research
LOREMA UPDATE:
STUDENT ACCOMMODATION 2013

Nigel Evans - team leader
Headlines
LOREMA UPDATE:

Rates

These are the various rates at which
applications submitted
permissions granted
constructionstarted
each year
up to and including H1 2013
DOWNLOAD REPORT HERE

Essentially a measure of pipeline activity...

...this is how that pipeline
looked like pre 2007
pre-Lehman
not particularly impressive
not particularly active
0
2000
4000
6000
8000
10000
12000
14000
2004 2005 2006 2007 2008 2009 2010 2011 2012 End
2013*
Application Permission Starts

But, in the dark days
that were to follow,
student
housing
saved the
day...
This is what saving the day looks like...
0
2000
4000
6000
8000
10000
12000
14000
2004 2005 2006 2007 2008 2009 2010 2011 2012 End
2013*

0
2000
4000
6000
8000
10000
12000
14000
2004 2005 2006 2007 2008 2009 2010 2011 2012 End
2013*
An almost
instant
response

more
applications...
0
2000
4000
6000
8000
10000
12000
14000
2004 2005 2006 2007 2008 2009 2010 2011 2012 End
2013*
ApplicationApplication

0
2000
4000
6000
8000
10000
12000
14000
2004 2005 2006 2007 2008 2009 2010 2011 2012 End
2013*
Application Permission
More
permissions
granted

0
2000
4000
6000
8000
10000
12000
14000
2004 2005 2006 2007 2008 2009 2010 2011 2012 End
2013*
Application Starts
More
starts

0
2000
4000
6000
8000
10000
12000
14000
2004 2005 2006 2007 2008 2009 2010 2011 2012 End
2013*
and from 2009 to
2012 an almost exact
correlation between
permission
rates and construction
starts

0
2000
4000
6000
8000
10000
12000
14000
2004 2005 2006 2007 2008 2009 2010 2011 2012 End
2013*
With permissions
being almost
immediately
converted to
construction starts.
A dynamic state of affairs
but...

sameacross the
whole of the
capital...?

Inner & Outer
BoroughsDOWNLOAD REPORT HERE

far more activity in the inner
boroughs,
more applications
more permissions
more starts
with near flat-line
conditions in the outer
boroughs.
0
1000
2000
3000
4000
5000
6000
7000
8000
2004 2005 2006 2007 2008 2009 2010 2011 2012 End
2013*
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
2004 2005 2006 2007 2008 2009 2010 2011 2012 End
2013*
INNER BOROUGHS
OUTER BOROUGHS

requires closer inspection –
when data lines cross
as in the inner boroughs
(application and permission rates down
but a surge in construction starts)
0
1000
2000
3000
4000
5000
6000
7000
8000
2004 2005 2006 2007 2008 2009 2010 2011 2012 End
2013*
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
2004 2005 2006 2007 2008 2009 2010 2011 2012 End
2013*
INNER BOROUGHS
OUTER BOROUGHS

or they spike
as in the outer boroughs
(going from 323 units in 2010 to 7,810 units
submitted in 2012)
0
1000
2000
3000
4000
5000
6000
7000
8000
2004 2005 2006 2007 2008 2009 2010 2011 2012 End
2013*
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
2004 2005 2006 2007 2008 2009 2010 2011 2012 End
2013*
INNER BOROUGHS
OUTER BOROUGHS

something of
significance
is almost always behind it
(Let’s take a detailed look starting
with the inner boroughs)
0
1000
2000
3000
4000
5000
6000
7000
8000
2004 2005 2006 2007 2008 2009 2010 2011 2012 End
2013*
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
2004 2005 2006 2007 2008 2009 2010 2011 2012 End
2013*
INNER BOROUGHS
OUTER BOROUGHS

Inner Boroughs

The recent spurtin construction
starts, we estimate it could top
the 6,900 unit mark in the
inner boroughs by year end (estimated by
doubling H1 2013 figures), points not only
to confidence
in the sector but also of
demand.
0
1000
2000
3000
4000
5000
6000
7000
8000
2004 2005 2006 2007 2008 2009 2010 2011 2012 End
2013*
Starts

However, in such a scenario we
would expect the
application
pipeline to show a
corresponding
increase as well
0
1000
2000
3000
4000
5000
6000
7000
8000
2004 2005 2006 2007 2008 2009 2010 2011 2012 End
2013*
Starts

But
in the case of student housing this is
simply not the case

0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Inner pipeline Outer pipeline
App PPG
Spot the inner borough
application pipeline
INNER BOROUGHS OUTER BOROUGHS

0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
App PPG
Spot the inner borough
application pipeline
Application pipeline

530 units
about the size of a medium sized student block
and that’s all that’s left...

This is a
pipeline
whose
foundations
are being
eroded
but
not replaced

If construction
rates continue at the
same level
as they have done post-Lehman then

the entire stock of
potential student housing
in the inner boroughs could be
exhausted
by the end of
2014

ironically
very forces
driving the student housing
since 2007 now
risk slowing it down,
albeit inadvertently.
Let’s take a closer look at those forces...

LOREMA Recap

0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
2004 2005 2006 2007 2008 2009 2010 2011 2012
0
2,000
4,000
6,000
8,000
10,000
12,000
2004 2005 2006 2007 2008 2009 2010 2011 2012
OuterLondon construction starts 2004-2011 private units
Inner London construction starts 2004-2011 private units
End 2011:
starts:
Inner borough up
7%.
starts:
Outerup
53%
*Private residential

0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
2004 2005 2006 2007 2008 2009 2010 2011 2012
0
2,000
4,000
6,000
8,000
10,000
12,000
2004 2005 2006 2007 2008 2009 2010 2011 2012
Outer London construction starts 2004-2012 private units
End 2012
Starts:
Inner up
42%
Outer
down
21%

0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
2004 2005 2006 2007 2008 2009 2010 2011 2012
0
2,000
4,000
6,000
8,000
10,000
12,000
2004 2005 2006 2007 2008 2009 2010 2011 2012
OuterLondon construction starts 2004-2011 private units
End 2011:
Starts:
Inner borough up
7%.
Starts:
Outerup
53%

The reversal of fortune due to
•scarcity of mortgage availability
•abundance of foreign equity
During 2011 equity was chasing super-prime existing
stock.
It seems now that that stock is slowly being exhausted
and to cater for the continuing demand developers are
building again and they are building
prime.
We could just have carried on here and said...

The reversal of fortune due to
•scarcity of mortgage availability
•abundance of foreign equity
During 2011 equity was chasing super-prime existing
stock.
It seems now that that stock is slowly being exhausted
and to cater for the continuing demand developers are
building again and they are building
prime. Housing...)

A case study

100 Middlesex Street Denning Point
A Tale of Two
Developments

Middlesex Street
Commercial Street

Nido
Cityscape
1,204 student unitsDOWNLOAD REPORT HERE

Nido
Cityscape
1,204 student units
128 private units

But could it be that the
very factors discouraging the
developmentof student accommodation in the
inner boroughs could
fuel it in the
outerboroughs?
Let’s take a look at those factors

0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
App PPG
Inner and Outer borough pipeline

0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
App PPG
9,100 units in the inner
planning pipeline – applications & permission combined

0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
App PPG
10,224 units in the outer
planning pipeline – applications & permission combined

Both sectors have a
similar potential
what differentiates them is
how close that
potentialis to delivery

0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
App PPG
The pipeline seems to suggest two things.
Firstly, that supply in the
inner boroughs is becoming exhausted

0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
App PPG
Secondly
that developers are gearing up to tap in to a
secondary market in the outer boroughs

But why so much
latent potential
in the
outerboroughs?

emergence of a
3 tier system
of provision

1. Offering International students
a more affordable choice

2.Providing off-site accommodation
for inner London universities
e.g....

Kodak
Land Sec
220 student housing units
spec build
WestminsterUniversity and UCL
have shown early interest in the units for their students.

3. Satellitecampuses
complete with teachingfacilities
and accommodation

Imperial College’s Imperial West
BBC site Wood Lane
“lock, stock and barrel”
600+ student units(already)
plans for a research & commercial facilities to come
a complete purpose built self-contained entity
SYNERGY

But there could be an extralevel

A 4thlevel fuelled by
the very factors inhibiting growth in the
innerboroughs

Another
LOREMA Recap

£psf values across the capital
investor activity
expandingfrom the
super-prime core to the
prime fringe

If demand increases
to such an extent that
investors venture
in numbers beyondthat
boundaryinto
traditional owner-occupier
territory ...

could lead to increased
demand for rented stock which
in turn could push
prices upwards
in the private
rented sector.

in the outer boroughs
bespoke student housingcould become
an increasingly attractive option
for the domestic student.

Why live in a shared house when you can have
free
wifi
gym facilities
concierge
laundry service
Security
for the same price?

Recap:
Inner boroughs:
Supply being exhaustedbut not replaced due to a shift in
focus by developers to super-prime

Recap:
Outer boroughs:
Will cater for an increasingly diverse group of students both
international and domestic

Recap:
Outer boroughs:
emergence of
super satellite universities
complete with
accommodationand
teaching facilities

And finally:
It seems that the future of student housing is all
about the outer boroughs, but...

Let’s just take another look at the inner borough
pipeline graph again.

0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
App PPG
The numberof applications may be diminished

0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
App PPG
but the permission pipeline remains strong

but as long as
the influx of cash
from overseas persists
student housing
will continue to take a
back seat to
super-prime residential

As long as the
influx
of
cash
from
overseas
persists

When that bubble bursts
Will it be student housing
that saves the day.
Again?

The Digital edition

The start of this presentation same each year
180,000 applications, 6,000 site visits, 20,000 schemes on
the database etc... Of those 20,000 schemes some
3,000are either lapsed, withdrawn or refused,
But, if this digital edition is about anything it’s about
visualisation
Let’s not say how vastthe database is
let’s visualise it
This is what 3,000 schemes looks like

Policy 3.8 of the London Plan seeks to ensure that
strategic local requirements for student housing are
addressed, without compromising capacity to meet the
need for conventional dwellings, especially affordable
family homes.

A lucky dip
All these sites have at one point been
in the planning system,
each site was once thought to have
development potential,
each one
could have again

The LOREMA Student Housing Update
In-box Tomorrow
LOREMA Main Report

LOREMA UPDATE:

Student Accommodation in London 2013

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Student Accommodation in London 2013