Purpose-built student housing good for tourism and education
Benefits can also include renewal of vacant sites and the re-use of historic buildings
The annual accommodation challenge faced by students is well documented, and with the 2019 academic year looming it is at the forefront of debate in an ever tightening private rental market. The latest Daft.ie Rental Report showed that the average monthly rents across the country rose to a new record level during the second quarter of the year, marking the thirteenth consecutive quarter of record rents.
In 2017, the Government launched the National Student Accommodation Strategy (NSAS), which concluded that the provision of 7,000 beds by the end of 2019 and 21,000 additional beds by the end of 2024 would free up at least 5,000 rental units for the wider residential sector. While 6,362 beds have been delivered across Ireland since 2016, there are more than 50,000 students enrolled in the ten third-level institutions within the canals of Dublin city alone, so there is clearly a pressing requirement to keep up with demand.
Despite Ireland being an attractive location for students, the market is quite immature, currently servicing 13pc of the student population through purpose-built student accommodation (PBSA), compared to 30pc in London and 38pc in Edinburgh. However, the Higher Education Authority believes approximately €1bn of total gross investment will be made in the sector between 2017 and 2024.
Two of the more active international players are Global Student Accommodation and Hattington Capital. Global Student Accommodation (GSA) is a leading provider of student accommodation, using its international expertise through its operating brand, Uninest Student Residences, to deliver thousands of student homes in safe, secure and central locations. It is on course to deliver up to 5,000 units for students in Dublin and Cork and currently has five schemes operational in Dublin, with a further two schemes opening between September 2019 and January 2020. While GSA currently has one scheme operational in Cork, the company will also open a second scheme in the city next year on the former Beamish & Crawford site.
Highlight Student Living, the operational brand of Hattington Capital, operates purpose-built student accommodation in 27 cities across the UK and has now expanded into the Irish market, with accommodation on Thomas Street in Dublin which opened in September 2018, and a new building called Parkgate on Montpelier Hill, due to open this September, with both properties developed by Hattington Capital.
The influx of inward investment to the sector has also been supported by local Irish institutions. Bank of Ireland sees student accommodation as an important part of the housing mix solution, facilitating much-needed accommodation to an international standard and in many cases providing capital investment and urban regeneration close to universities and colleges. Based on current pipeline deals and existing stock, we will have supported delivery of just over 5,000 beds to the Irish market by 2020.
PBSA is a key focus for investors across Europe and internationally and the benefits are obvious. There is strong demand, with schemes operating at or near 100pc capacity and that level of demand is expected to continue as new schemes are developed. These properties aren't just in use for the student calendar months. While students have the option to keep their apartments during the summer, many opt to rent only for term time, which frees up the accommodation for tourist beds in the peak season. There are also urban rejuvenation benefits, as projects often involve the renewal of vacant sites, the restoration and reuse of historic buildings and increased pedestrian linkages.
Paul McDonnell is head of property finance at Bank of Ireland Corporate Banking