The challenges posed by COVID-19 have accelerated many changes that were already underway in the PBSA sector, while highlighting to what extent such changes should be implemented in different countries.
Long-term and core lettings in both Germany and the Netherlands have been largely unaffected by the fallout of COVID-19, although some universities started the academic year later than usual. Bigger cities, such as Hamburg and Berlin, however, have experienced heavier impact and PBSA operators are turning towards a more blended model and targeting young professionals.
The growing popularity of blended living does not only present an opportunity for investors in that they are not solely relying on one demographic-type to increase occupancy. It may also represent a shift in what many students are looking for in university accommodation, with our own research showing that more than four in ten would be willing to share their accommodation with similarly aged non-students. As such, increased demand will stimulate growth for blended living schemes, particularly in major cities that are reliant on international students who generally are willing to pay higher rents.
Despite international applications beings up 10% compared to last year it has been a turbulent start to the academic year in the UK. Travel restrictions and other practical difficulties mean that despite international students wanting to travel to the UK for their studies, many are simply unable to do so. However, there remains a strong appetite among international students to study at UK universities, with applications from China, India and Hong Kong surging by 24%, 23% and 14% respectively.
We have also seen attempts at a blended approach to university living in the UK, with unsold or vacant rooms often being made available to young professionals and as coliving spaces. Nido’s strategy, however, has pivoted to redirect focus to domestic students while also utilising digital viewings technology to engage with international students. We are maintaining a student-first approach and placing their needs front and centre, allowing timings to stray slightly if needed through flexible booking and arrival policies. Since the introduction of these policies, we have seen a 30% rise in bookings — while some residences have seen a surge of 50%.
Despite being faced with the prospect of a year of remote and virtual learning, Nido’s own research found that 60% of students would still move away from home even if their university is not offering full-time face-to-face learning.
Therefore, we anticipate that even with cautious prospect of a second lockdown, savvy investors will continue supporting operators that offer flexible contracts, incentives and compensation. They should also find reassurance in knowing there was a surge in the number of students applying for post-graduate courses in the wake of the Global Financial Crisis, as graduates put off entering a lacklustre workplace in favour of waiting out the recession.
Perhaps unsurprisingly, our research also found that students, when making choices about their accommodation, still think the experience of viewing the property — either virtually or in person — as the most important factor. As such, investment in digital platforms and online onboarding with virtual viewings aimed at attracting overseas students, in particular, is set to increase substantially over the coming months and years.
COVID-19 has also fast-tracked the involvement of parents in choosing university accommodation, conscious that their children will be spending much more time in their ‘digs’ than before. This is a factor that needs to be understood by investors when acquiring, developing and selling. Placing student priorities first and foremost in PBSA will not go unnoticed by parents, thus protecting and driving income.
Although the impact of a second wave must not be discounted, for now, yields remain consistent and valuations are holding steadfast as students and parents alike look further ahead. CBRE predicts that there are around £1 billion worth of deals involving PBSA currently on the table in Britain alone. We, therefore, predict a return to business as usual in the major university cities from September 2021 and expect to see 100% occupancy with a rental uplift thanks to greater demand on secure and well-designed PBSA, developed and operated by those who swiftly respond to the changing demands of the students.