Octopus student survey: Students prioritise technology

Students are demanding technology in accommodation, according to research into student preferences commissioned by Octopus Real Estate, as technology increasingly transforms education – across everything from learning convenience to different learning styles.

In the first year, students who achieved top grades are twice more likely to have prioritised the use of technology when choosing accommodation (19%), than those who achieved 69% in their grades or lower (9%), according to the research. This trend continues in the second year.

Similarly, in the third year, those who achieved top grades were significantly more likely (24%) to prioritise technology in their accommodation than those who achieved 69% or lower (15%).

Technology in PBSA was rated as ‘excellent’ by 39% of students living in PBSA in their first year, compared to less than a quarter (23%) in halls of residence. In the second year, as more students face the decision of whether to move into PBSA or an HMO / shared house, the gap between alternative accommodation widens to almost double (33% compared to 20% in an HMO/shared house), and increases for third year students (43% compared with 25%).

MCR Property’s Nick Lake says:

 “What hasn’t changed is that students want faster internet, a double bed and a high quality of service. They have an expectation of accommodation on a par with a hotel, as opposed to hostels that were available 20 years ago.”

International students are more likely to prioritise technology (20%), than British students (14%). This includes being more likely to ensure accommodation has speedy and dependable WiFi/internet (23% compared to 15%). With technology being imperative for students, developers should make it part of project plans.

There are notable different priorities between domestic and overseas students in UK universities. British students choose accommodation based on the ability to socialise: international students prioritise practicalities, the online survey showed. With extra pressures and additional costs, international students take their studies seriously, reflected in their attitude to accommodation, suggests Octopus. With international students representing a significant proportion of the market, it pays for developers to heed their concerns and provide PBSA supporting academic goals.

Gavin Eustace, head of residential development at Octopus Real Estate added:

“Purpose-Built Student Accommodation accounts for under a third of the market, but the sector is growing strongly and offers a huge opportunity for developers. We’re proud to champion this sector, as demand for specialised student accommodation continues to rise. At a time when the job market and financial pressures for students are so high, developers are making a positive impact with PBSA on student academic performance and health.”

james.wallace@realassetmedia.com

Goldman: Retailers need to be surgical in pruning their high margin products as well as real estate footprint mix

Retailers which are focused on pruning their portfolios, from the products they sell to the mix of real estate across their footprint, are the better placed to be the winners in the ongoing transformation of the retail sector.

In the fifth and final installment of this multi-part miniseries, Goldman Sachs’ head of retail investment banking, Jen Davis explains that retailers need maximize their core capabilities in growth areas – and do not be afraid to be discriminatory on the product. For example, VF Corporation, the US-based global apparel and footwear company, spun off its traditional denim brands, Lee and Wrangler, into a separate company, called Kontoor Brands, in order to focus on its remaining higher growth brands focused on the active outdoor and work spaces, such as Vans, Timberland and The North Face.

Davis explains:

“For a company like the VF, they saw denim and the brands that they owned as slower growth, lower margin. And so, for them, from a shareholder perspective, to separate the higher growth, higher margin from the lower growth, lower margin was very helpful and additive to shareholder value.

Another example is Gap which has spun off Old Navy, separating long-standing sister brands including Banana Republic, Athleta brands, as well as Gap itself. The rationale, explains Davis, was that Old Navy is a more distinct value brand than the others.

“Management teams are thinking holistically about where they can add the most value and how, from a shareholder perspective, they can deliver the most upside for their investors,” said Davis.

The brands, and retailers, which have suffered most in recent years tend to be those which have failed, among other things, in adapting to technology progress.

Davis says:

“We’ve all seen the headlines of the retail bankruptcies that have happened over the past several years, whether it’s Toys ‘R’ Us, Gymboree, Mattress Firm, Payless, Claire’s; for a lot of private equity players who put a lot of money to work in this sector it’s been a very difficult investment strategy overall.”

Private equity investment has been more successful in less Amazon risk sectors, such as high growth restaurant brands, smaller growth companies where there is a feasible international growth play, and in ‘going upstream’, supporting multiple brands at the logistics level without taking that end-market risk.

Davis explains:

“A good example of that is Cornell Capital, who bought a company called KDC last fall, which basically manufactures the packaging for beauty brands. And so rather than picking what is the next hot beauty brands, they work with hundreds of brands, and basically provide the packaging back office supply chain and so forth for all of those brands.”

Davis was speaking Goldman’s Jake Siewert, in the firm’s latest Exchanges at Goldman Sachs podcast.

james.wallace@realassetmedia.com

‘Liverpool has it all’

Tourism is a vital element of the package. Liverpool is the most visited cultural destination in the UK outside of London. Many are attracted by the Beatles and by football, but there is also the Tate Liverpool and a lot else besides.

Business and culture, technology and tourism: Liverpool has it all, delegates heard at Real Asset Media’s UK Investment Outlook: FDI and Capital Flows, which was held in July at Nuveen’s London headquarters.

‘We have a £31.5 bln economy and 49,000 active businesses, that are growing at a faster rate than the rest of the UK,’ said Rachael Bampton-Aiken, Interim lead, Inward Investment Service, Liverpool City Region. ‘Over half of the UK’s trade enters via Liverpool, which is also a tech hub and the top city in the UK for immersive technology’.

The Hartree Centre and the IBM laboratory hosts the UK’s largest supercomputing facility and the plan is for it to be at the centre of a potential tech cluster, while there are advanced manufacturing hubs in the chemical, pharma and manufacturing sectors. 

Rachael Bampton-Aiken, Interim lead, Inward Investment Service, Liverpool City Region

The city spends 4% of output on Research&Development and healthcare and bio-manufacturing are another focus.The Royal College of Physicians has a brand new building in the city centre.

The biggest property potential is to be found in the Knowledge Quarter, Bampton-Aiken said, now known as Upper Central, a 56-acre plot with 2.5 mln sq ft of development opportunities. The site runs from Central Station to Liverpool Science Park and the idea to encourage mixed-use development and create a magnet for the digital, tech and creative industries, creating 7,000 jobs in the process in the coming decade.

Liverpool’s City Council is also developing the £1 bln Paddington Village scheme in the heart of the development zone and it plans to connect the newly-regenerated areas to the retail district in the city centre. 

‘We focus on technology, innovation and the digital future, but also on emerging sectors that deliver clean growth like tidal, wind and hydrogen energy generation,’ she said.

Tourism is a vital element of the package, Bampton-Aiken said: ‘Liverpool is the most visited cultural destination in the UK outside of London. Many are attracted by the Beatles and by football, but we also have Tate Liverpool and a lot else besides’. 

Contact the editor here.

Octopus student survey: PBSA is best for student wellbeing

Student wellbeing is playing a significant role in the mental health discussion in the UK, with students recognised as vulnerable to isolation and facing social, academic and financial pressures.

The Octopus Real Estate research highlights the higher levels of well-being experienced among students in PBSA. A recent study into the UK academic experience by the Higher Education Policy Institute reported low levels of satisfaction. By students’ own reckoning, whether starting their degree or being close to finals, accommodation affects happiness levels.

This finding is corroborated by the recent survey commissioned by Octopus. Students in their first year are more likely to be ‘very satisfied’ with their mental health (34%), compared to those living in halls (23%). Further, those living in PBSA in their first year are almost twice as likely to be ‘very satisfied’ with their physical health (60%), than those living in halls of residence (32%).

Similarly, 44% of students are ‘very satisfied’ in ‘achieving the personal goals set at the beginning of the year’ – 18% more than those living in halls. Given the importance of this issue, developers of PBSA have an important role in delivering accommodation that aids wellbeing and gives a rounded student experience.

Andrew Jamieson, EREC Estates, explains:

“Providers have to respond to the desires of students for not just much better facilities and amenities, but what I’d call life support services to support the whole student experience.”

The research, conducted by FTI Consulting’s strategy & research team surveyed 1,105 UK-based students, aged between 18 to 25 years old during 30 April to 9 May 2019, identified five key priorities for students, the often-overlooked end customer in sector estimated to be valued at more than £50 billion by year-end.

Throughout their stay, university students continue to be more satisfied with their physical health when living in PBSA than other accommodation options. Students are increasingly focusing on their physical health, suggesting more opportunities for gyms in PBSA.

Elsewhere, research from Save the Student found that one in two students say they struggle to pay rent, and that more than a third believe that money worries affect their studies. At the same time, there continues to be a significant number of students whowould pay for extra facilities in their accommodation.

The appetite for these facilities gives room for developers to expand plans and deliver better, affordable PBSA to more students.

MCR Property’s Nick Lake says:

“Providing something that isn’t en-suite is becoming harder and harder to get away with. We are always staggered by what students are able to pay, getting really, really nice student accommodation for an extra £25 a week. They want something functional but good quality.

james.wallace@realassetmedia.com

Goldman: ‘baby boomers and retirees have money to spend and time to spend it’

Today over 90 percent of ecommerce orders are bought with free delivery, according to stats shared by Davis, leading customers to now always expect free delivery. This expectation has implications at the operational level. Davis explains:

In the fourth installment of this multi-part miniseries, Goldman Sachs’ head of retail investment banking, Jen Davis explains that retailers recognise that baby boomers and retirees are a large and growing demographic that will continue to populate. Davis says:

“That demographic has dollars to spend and time to spend it. And so, I think not only in thinking through online investment, we’re seeing retailers making investments into services.

“So, one example of that is Best Buy, the consumer electronics retailer, buying a company called GreatCall last year, which basically provides in-home emergency services to senior citizens. And that’s a focus for Best Buy, to try to get more of their services in their home. And so more connectivity with their customer overall. It’s been an area of acute focus for a lot of retailers today.”

Retailers’ investment in logistics and technology

Today over 90 per cent of ecommerce orders are bought with free delivery, according to stats shared by Davis, leading customers to now always expect free delivery.  This expectation has implications at the operational level. Davis explains:

“Traditional players are first investing in ‘ buy online/pick up in store’ (BOPUS) capability and making sure that they can fulfill that. The second is in terms of backend speed, and where they can invest to fulfill that much quicker. And obviously, Amazon has upped the ante in terms of what we all expect in terms of days.

“A good example of this is Kroger, the grocer, made an investment last year in a UK company called Ocado that focuses on the automated warehouse. They bought five per cent of Ocado, and in turn, entered an agreement where they would build 20 automated grocery fulfillment warehouses across the United States over the next three years. And so, Kroger is trying to confront the Amazon threat in the grocery space in terms of having a very automated fulfillment in terms of online grocery delivery.

“It’s been less on the pure M&A side and more on the investment and/or partnership experience overall.

“More broadly, aside from just logistics, where retailers are focused today is leveraging the kind of troves of customer data and loyalty programs that they have. If you think about going to Costco and using your membership card to buy your products and purchases, they have an enormous amount of data on what you buy every month, and what you’re focused on. Using that customer data and analytics to hyper-personalise the experience, both in terms of marketing and what they are pushing out to you from a promotion standpoint, is another area that retailers are very focused on.

“And I think it’s interesting, in consumer survey work, they say that 80 per cent of consumers are more likely to do business with a company if they offer a personalised experience.”

Davis was speaking Goldman’s Jake Siewert, in the firm’s latest Exchanges at Goldman Sachs podcast.

james.wallace@realassetmedia.com

‘Belfast, city of opportunity’

One advantage the city has is its connectivity and good transport links, with fast broadband and a 5G network, 230 flights a week from London and strong connections with Dublin.

The office sector in Belfast is booming, Sean Dolan, Development Manager, Belfast City Council, told Real Asset Media’s UK Investment Outlook: FDI and Capital Flows, which was held in July at Nuveen’s London headquarters.

‘The city’s Growth Agenda which aims at revitalising the city includes 1.5 mln sq ft of new grade A office space by 2021, 1 million of which has already been delivered,’ he said. ‘Four out of five existing investors are choosing to stay, invest more and expand, so we are getting good accolades.’ 

Planning permission has just been granted for a new office block called The Sixth. Having a business-friendly City Council helps. The plan is to have a 20% increase in residents by 2035 and create 46,000 new jobs, especially in tech and the knowledge economy.

‘Belfast is the top city in Europe for new software development projects and the number one globally for fintech investment’ Dolan said. ‘There are opportunities also in data security and analytics and cybersecurity. There is a new Science Park and Incubation hubs to allow seedling projects to grow’.

One advantage the city has is its connectivity and good transport links, with fast broadband and a 5G network, 230 flights a week from London and strong connections with Dublin.

Sean Dolan, Development Manager, Belfast City Council

Another advantage Belfast has is its young population, as 40% of its inhabitants are under 30. As part of the Growth Agenda, the University of Belfast with its 15,000 students and staff is relocating from the suburbs to the city centre, which means there will be opportunities in student housing. Some activity has already taken place and 1,500 new purpose-built beds have been delivered. 

The hospitality sector is also growing fast, as tourist arrivals increase. The plan is for 2,500 new hotel spaces to be ready by 2021, and so far 1,300 have been delivered. ‘There are opportunities in mixed-use developments at the Belfast Waterside and also at the Titanic quarter, where £400 mln have already been spent,’ he said. ‘One million tourist a year visit the Titanic centre alone’.

The uncertainty over Brexit cannot be avoided but it could work to Belfast’s advantage whatever happens, Dolan said: ‘After the UK leaves the EU, Northern Ireland will be able to benefit to its closeness to what will then be Europe’.

Contact the editor here.

Goldman: retailers are prioritising last-mile delivery, ‘BOPUS’ and leveraging footprint to drive traffic

Retailers, both traditional and ‘digital-native’, are cherry-picking the best of each other’s real estate strategies to optimize their store footprints.

Goldman Sachs has observed a ‘shift back to the middle’ among both breeds of retailer, with large retailers moving aggressively in ecommerce “because they needed to”, and ‘digitally-native’ brands “finding some value in brick-and-mortar stores”.

In the third installment of this multi-part miniseries, Goldman Sachs’ head of retail investment banking, Jen Davis explains the three core areas where traditional are investing to optimise their strategy in the age of disruption. Davis explains:

“Traditional retailers have been investing is in last-mile delivery, and in ‘buy online pick up in store’, or BOPUS. They do that both in terms of lowering distribution costs, and two, getting add-on sales. A good example of that is Lowe’s, they fulfill 70 percent of their online orders via their stores. And so that’s a significant chunk of their online business today. And 30 percent of the time, when a customer comes to pick up their order, they add on an additional product.

“Another example is Walmart. Walmart’s on track to offer grocery pickup in almost 3,100 stores, and they will add grocery delivery from 1,600 stores by year-end. And so really thinking about this last-mile delivery to customers today is one area that the traditional brick-and-mortar players have been thinking about, using their footprint.”

The two other areas traditional retailers have been focused on is on smaller stores and more urban centers with a more localised assortment smaller footprints specifically by big box retailers, according to Goldman’s Davis. A further area of focus is in providing services to drive traffic, such as dining, tailoring, grooming with manicures and pedicures – anything to drives traffic by leveraging their existing footprint.

Davis explains:

“For the ‘digitally-native’ brands, they are also seeing the benefit of having a brick-and-mortar and kind of omnichannel offering. And what’s interesting today, you’ve seen dozens of stores from Warby Parker and Caspar and Bonobos and Away, the luggage company, all opening stores today. Those ‘digitally-native’ brands combined are expected to open almost 850 stores over the next five years. And so, I think you see this convergence between the traditional players and the ‘digitally-native’ brands coming together in terms of their store footprints.”

Davis was speaking Goldman’s Jake Siewert, in the firm’s latest Exchanges at Goldman Sachs podcast.

james.wallace@realassetmedia.com

Octopus student survey: better accommodation makes for higher grades

Students, the end customer in the rapidly expanding purpose-built student accommodation (PSBA) sector, are more aware today than previous generations of the importance of accommodation in creating the right environment for achieving their academic goals, according to a survey commissioned by specialist lender Octopus Real Estate.

The research, conducted by FTI Consulting’s strategy & research team surveyed 1,105 UK-based students, aged between 18 to 25 years old during 30 April to 9 May 2019, identified five key priorities for students, the often-overlooked end customer in sector estimated to be valued at more than £50 billion by year-end.

In today’s article, we consider the first key finding: students’ view on the importance of accommodation in creating the right environment for academic success. Octopus’ research shows a correlation between PBSA and academic results.

Students in PBSA are 26% more likely to report top grades in their first year of university, than those living in halls of residence, according to the research. This trend continues as students’ progress through each year of university. In addition, six out of 10 students surveyed believe that “staying in different accommodation would have helped me achieve higher grades.”

Gavin Eustace, head of residential development at Octopus Real Estate, explains:

“Those who lived in PBSA are more likely to report top grades. Similarly, many post-graduates feel that they should have chosen different accommodation for higher results.

“It’s clear that UK-based students recognise the role of PBSA in how much they enjoy university and how well they do in their degree. As a result, they have very specific requirements when it comes to choosing where they live.

“Students want space and privacy to study, a technology-enabled environment, and facilities that enhance their independence and wellbeing. Developers who can meet these requirements will be well placed to capitalise on student demand

“Students face uncertainty, including higher debt and a tough job market. The average student in England will graduate with debts of over £50,000.1 As a result, many students have a strong focus on their final grade. They are also aware of the impact that accommodation can have on learning and results.”

james.wallace@realassetmedia.com

‘Positive outlook for the Portuguese market’

Portugal is much smaller country and can never achieve the scale of the Spanish market, but it has the advantage of being ‘less volatile, with a reliable Government, political stability and positive GDP growth’.

Spec development has been happening in Portugal for the first time in ten years, a sign of the positive outlook for the market, delegates heard at the Iberian Investment Briefing, which was organised by Iberian Property and Real Asset Media and took place in London recently.

‘Portugal used to be on the periphery of Europe, but that is no longer the case,’ said Pedro Coelho, Chairman, Square Asset Management. It is much smaller country and can never achieve the scale of the Spanish market, but it has the advantage of being ‘less volatile, with a reliable Government, political stability and positive GDP growth’.

A new law in January will introduce REITS to Portugal, following in Spain’s footsteps. This is a positive development that will have far-reaching consequences, he said: ‘It is crucial to have an internationally recognised vehicle and listed companies will have liquidity. It is a very important step for Portugal’.

After ten years of virtually no construction except in the residential sector, ‘now finally we see speculative development in both resi and offices,’ Coelho said. ‘I expect that with the new supply prices will stabilise’.

Prices have been rising and are high in the main cities of Lisbon and Porto, but ‘prices in secondary cities are still lower than they were before the financial crisis, so there are still opportunities to be found’, he said. He singled out retail in particular as a sector that has great momentum.

Logistics has attracted investment and alternative sectors like student housing have also been doing very well, as demand grows due to the influx of international students from Portuguese-speaking countries like Brazil. 

‘We are involved in student housing in Lisbon and Porto and the market is promising,’ said Javier Martin, Senior Portfolio Manager, Nuveen Real Estate. ‘The only problem is that we have a €50 mln threshold so it can be difficult to invest in smaller markets’. 

The Portuguese student housing market is very strong, said Brian Welsh, CEO, The Nido Student:  ‘We have assets in Lisbon and Porto but we are looking to increase and strengthen our presence in the country’. 

Contact the editor here.

Savills: German residential investment activity reached €6.2 billion in H1

Investment activity in the German residential investment market totalled approximately €6.16bn during H1, approximately 36% lower than H1 2018, according to Savills.

Approximately 43,800 apartments changed hands during H1 2019, which is around 46% less than in the corresponding period last year. This decline is partly attributable to the large volume Buwog acquisition in March 2018. A total of 165 transactions (for at least 50 apartments) were completed, which is 18% less than in the first half of 2018.

This takes the total for the last 12 months to 238 sales, which is the lowest figure since September 2013. The average transaction over the last twelve months comprised 399 apartments, which is the third lowest figure in the current market cycle.

Karsten Nemecek, Managing Director Corporate Finance – Valuation for Savills Germany, explains:

“The decline in transaction volume is not a sign of lower demand but rather a consequence of the limited supply of larger portfolios,” says adding: “Many investors even want to further increase allocations to residential property within their portfolios. However, since larger portfolios are scarce, they either have to acquire medium-sized residential portfolios or development projects.”

Within the regions, investment activity in North Rhine-Westphalia and Schleswig-Holstein were the standouts in H1, accounting for 22% and almost 13% of all apartments transacted, respectively. This compares with five-year averages of around 20% and 8% respectively. Berlin was once again leading among the federal states during the first half of the year with around 10,300 apartments (25% of all apartments transacted).

The institutional residential investment market remained strongly focused on the seven A-cities – Berlin, Cologne, Duesseldorf, Frankfurt, Hamburg, Munich and Stuttgart –which have been responsible for around 52% of investment, or approximately €3.2bn, since the beginning of the year. With a transaction volume of more than €1.8bn, around 30% of the overall volume, Berlin was also by far the most sought-after location for residential investment.

Matti Schenk, Senior Consultant Research Germany for Savills, explains:

“The high level of economic momentum and continued attractiveness of the capital are likely to ensure that the apartment market remains strained going forward. This is all the more likely in view of the continued low levels of new-build activity. As a result, investors have priced further rental growth potential into their investments.

“However, with the rental cap on the table, the leveraging of this potential is likely to be significantly restricted regardless of the issue of constitutional validity. A period of legal uncertainty and consequently a deterioration of the investment climate in Berlin’s residential investment market is currently looming on the horizon.”

The average price of apartments transacted in the last 12 months stands at almost €120,000 for existing apartments while an average of around €289,000 per apartment has been paid on development projects. This represents an increase of 21% year-on-year on the average price of existing apartments transacted while prices of apartments in development projects have stagnated.

Schenk added:

“The stagnation of average prices in development projects is a consequence of the increase in acquisitions outside of the A-cities. Smaller cities also frequently have strained rental apartment markets, meaning that new-build apartments in such locations also represent interesting investment opportunities.”

Acquisitions of development projects accounted for around 22% of the transaction volume in H1. Around 40% of apartments transacted in development projects were located in A-cities, which is significantly below the five-year average (55%). In contrast, around 16% of apartments transacted in development projects were in D-cities compared with a five-year average of less than 4%.

German investors accounted for approximately 95% of the transaction volume, which is even higher than the five-year average (78%). Nemecek added:

“While foreign investors are highly interested in the German apartment market, they are often unable to secure direct investments. In addition to the already relatively complex legal framework, the discussions regarding additional regulations are likely to further impede the market entry of investors who are unfamiliar with the German apartment market.”

However, investor demand for residential property in Germany is likely to remain high, particularly from risk-averse German investors.

james.wallace@realassetmedia.com