The official story goes like this. According to Savills, the number of student beds has risen from 19,366 in 2014 to 22,730 today (if the 2,200 bed pipeline is included). The student population is around 52,000 – meaning about 44% can sleep in purpose-built accommodation. If demand is 52,000 and supply is 22,730, then everything is rosy.
Knight Frank cuts the data another way to reach the same conclusion. It suggests around 61% of Nottingham students do not have access to purpose-built accommodation. Partner Merelina Monk says if that figure hits 50%, it will be time to worry – and Nottingham’s not there yet.
So far so good. Both suggest a rise in supply, but not a looming crisis.
Yet according to Nottingham Trent University, these comforting figures rest on a freshman mistake.
Simply put, the claim is that total potential demand for private, purpose-built student housing is nothing like the 52,000 student population. Once you exclude the 20% of NTU students whose parental home is within commuting distance (and the smaller number of commuting students at Nottingham University), the pool drops considerably. Make a few more intelligent assumptions about demand, and the total falls off a cliff.
Tim Woodman-Clarke is head of accommodation at Nottingham Trent University. He explains: “First years like to move into university-owned accommodation; second years by far prefer sharing a private house with friends; third years will be in the market for private-sector purpose-built student housing and so will postgraduates, so the market for purpose-built private student housing is about a third of the student population.”
If Woodman-Clarke is right, the total available demand is between 17,000 and 35,000, depending on the generosity of the assumptions. Certainly not 52,000. This puts into a new context the 22,730 beds available today or under construction. Similar risky calculations have been made in Leeds (in 2013) and in Manchester, where as a result the supply has been sharply curtailed. NTU has explained its concerns to Nottingham City Council and the council appears to be listening.
Jane Urquhart, Nottingham City Council’s portfolio holder for planning and housing, says: “With vacancy rates at around 2%, and the student population expected to remain stable, it appears that purpose-built student accommodation is in line with demand. However, we are proposing that new developments should show there is a need, widen the appeal to returning second or third year students, and be capable of being reconfigured through internal alterations to meet general housing needs in the future, to mitigate against possible over-provision.”
University complaints about private sector over-development come with a health warning. Nottingham’s two universities are by far the largest providers of purpose-built student housing (Savills says there are 13,224 university beds compared to just 9,230 private sector beds).
The universities are continuing to build: NTU is in talks with Miller Birch about providing 500 new beds at the former Guildhall site, close to the NTU city centre campus. “It’s probably aimed more at overseas students,” says Miller Birch’s development director Mark Bielby. “If there’s an oversupply issue, it might be for more peripheral locations, not prime spots like this.”
Paul Hadaway has at least £34m-worth of reasons to worry about over-supply in the Nottingham student housing market. Hadaway, chief executive at Empiric, is anxiously awaiting the completion of the £18.5m Frontage and the £5m Talbot Point schemes, which between them add another 239 mostly studio beds to Nottingham’s busy student scene. The REIT already owns Talbot Studios, bought last year for £9.9m.
So is Hadaway worried? He says not. “Yes, student accommodation is the flavour of the month and you do get cities suffering from indigestion – we had that in Exeter in 2013,” he says, adding that his own exposure to Nottingham is relatively small. Bookings at Talbot Studios – a 98-unit scheme, already trading when Emperic bought it – are up 25%, he says.
Developers and landlords who don’t – or can’t – take Emperic’s long-term ride-it-out view, might find comfort in the growing obsolescence of some older, first-generation student housing.
It is widely estimated that around 20% of all existing stock – perhaps 4,000 beds – is reaching the end of its useful life and/or is in locations nobody would build today. These beds will need to be replaced.
“The old tired stuff is a problem,” says Jonty Green, head of FHP Living’s student team. Refurbishing it would be costly – NTU recently spent £90m smartening two blocks, and few private landlords will want to spend on that scale. Meantime, many first-generation schemes are in doubtful locations. “Student demand has migrated to new areas,” he says.
The list of locations now off the map include Carrington, Sherwood, Radford and Hyson Green (“Ideal if you like to live near crime,” a second year English student scornfully told EG – although some say the latter two areas aren’t finished yet).
Meanwhile, the council continues to push demand into the centre, with much of it landing within half a mile of the university campuses. Lenton is still the top student address.
“If I had a 20-year plus student block in a less popular location, I would sell it now, because demand in those areas will continue to contract,” says Green.
There are some natural brakes on the supply of Nottingham student housing, not least competition for city-central sites from PRS developments and the office market.
Matthew Smith, lead director at JLL in Nottingham, says the office market is making incursions, too.
“Office developers are now competing for the office-to-resi sites student housing might once have taken. The buy price for student resi conversion is £45-£90 per sq ft – and office refurbishment can now generate higher values,” he says.
Student housing in Nottingham is a numbers game – and it helps if you’ve got the numbers right.
A numbers game
Rising build costs – from £50,000 to £58,000 per bed – are combining with rising land prices to push Nottingham student rents to new highs.
“Rents have to be £140 per week to make schemes viable, which is an aspirational rent for Nottingham,” says Lizzie Whetman, associate director in Savills’ student housing team.
Jonty Green at FHP Living says: “You can get £140 per week for a studio, but in a four-to-five bed cluster flat, per person rent might be £115-£125 per week.”
That said, Barry Howard Home’s Hydrogen studio scheme is scoring rents from £135 to £210 per week, says Green.
Donkey Derby no longer…
Derby was the also-ran of the last city-living boom. By the time the clocks stopped in 2008, the city had barely seen any apartment development.
Today, that’s all changed. Around 230,000 sq ft of office-to-resi conversions have been approved in the Past year, while Compendium Living’s 800-unit Castleward scheme and the 35-unit 1 Cathedral Green (Barratt/David Wilson Homes) head a list of 24 on-site and on-the-drawing -board schemes. Savills estimates an imminently deliverable pipeline of up to 300 units, with 3,000 said to be in view before 2021. Prices are rising – from £200 per sq ft to £230 per sq ft.
Derby was recently granted Housing Zone status meaning that it can bid for a share in £200m funds for demolition and to clear contaminated land. Savills is researching prospects for the council. Savills head of development Michael Donaghy says PRS is (so far) small-scale, and a viable 200-unit scheme would be big for the city. “Good suburbs close to the city centre, along Friargate and the Duffield Road, also have a dampening effect on city centre development,” he says.
Russell Rigby, managing director at Rigby & Co, does not agree. He says: “Do not tell me that Derby does not have an appetite for PRS. I am aware of two funds which are keen to get involved in PRS development in Derby, capital values £10m-£15m each, which amounts to up to 250 units. There are many opportunities here and sales revenue figures on the schemes under way are exceeding expectations.”
Nottingham in numbers
98.4%
occupancy of student housing in Nottingham
5.75%
yield on good prime Nottingham
£58,000
construction cost per student bed
2,200
pipeline of new Nottingham student beds
Source: Nottingham City Council, Knight Frank, Savills
