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News Release

Nottingham

More students in offices than businesses

figures revealed by Jones Lang LaSalle


Nottingham, 27 February 2013 – As office take-up figures for the past 12 months showed proposed conversion to student accomodation outstripped all other uses during the same period, one of the leaders in this field locally, Jones Lang LaSalle, believes the sector still offers room for growth.

During 2012, 275,000 sq ft of legal exchanges / completions occurred for offices to be converted into student accommodation, whilst during the same period, offices acquired for business space totalled 240,000 sq. ft., highlighting the dominance of developer demand within the city.

The reason for this trend is two fold. Firstly, the office rents and capital values wiithin Nottingham are low against high student rents, therefore  the viability of conversion to student accommodation is more commercial than refurbishment for continued existing use. Further, student housing is  outperforming other commercial real estate sectors within the UK, delivering total returns of between 11-15%.  Unlike the commercial market there is a realtively stable income and stronger potential for rental growth with higher occupance rates.  Due to the less cyclical nature of further / higher education the performance of student assets is more resilient to downturn in performance.

Matthew Robertson, associate director at the Nottingham offices of Jones Lang LaSalle reports that Nottingham is being highlighted across the UK as a target location for  regional and national student developers and operators.  Demand is focused on Nottingham as there are two strong universities and the capital value of office space is relatively low.

To date, Jones Lang LaSalle has successfully exchanged, completed or put under offer buildings which will deliver around 550 student beds within the city and already there are a series of buildings at various stages of the development pipeline which are being converted by national investors, developers and operators.  Recent activity includes exchanging on 55,000 sq. ft. at Minerva House, situated on Spaniel Row, with a proposal for the redundant offce building to deliver 151 student bedrooms. Similarly, 30,000 sq. ft. at Victoria House and 45,000 sq. ft. at Lawrence House were two buildings which were no longer viable for refurbishment for continued office use, and Jones Lang LaSalle identified student developers for their conversion.

There are 50,000 students with a residential need in the city, with only 14,500 housed in institutionally provided accomodation, demonstrating the shortfall of suitable properties within Nottingham.  Around 40 per cent of the intake comprised full-time and international students which is anticipated to increase, putting greater demand on dedicated student stock. UCAS figures issued during 2012 highlight that demand continues to outstrip supply in student accomodation.
 
Matthew Robertson commented:
 
 “There are real opportunities in the city to stimulate growth through redevelopment of obsolete buildings, creating sustainable new environments which are more easily managed and policed.  There is evidence that students are more attracted to living in the city centre, which in turn brings further spending into the local businesses and nightlife.  By converting obsolete buildings into student housing, the availability of traditional housing within the city and immediate suburbs will increase by releasing private properties currently let to students.  This will help address the present shortfall of family homes, which is currently behind target.”

New energy regulations are also expected to impact on older and more challenging buildings within the city.  In 2018, it will be illegal to offer an office building  for let (or for sale) unless the EPC rating is E or above.  These buildings will therefore require significant capital expenditure and are likely to be converted to alternative uses or demolished. If converted to student accommodation, these buildings will be more cost efficient for the occupiers than the existing dated housing stock within Nottingham. With students already having to withstand growing tuition fees, they will look to more energy and cost efficient accomodation offered by purpose-built schemes which understand and cater to the sector.

Matthew Robertson added:
 
“There is evidence to suggest that with rising tutition fees, the student market will shift over the next five years towards flexible study, with Higher Education Institutions (HEI’s) offering a wider range of two-year degrees instead of the traditional three-year courses.  Applications from mature students are also expected to rise, particulary for vocational courses.  This will drive demand for accommodation with a greater specification, with fewer students wishing to share and more of an emphasis on homes which resemble private apartments as opposed to the insitutionalised accomodation which has traditionally been provided."

Looking ahead Matthew Robertson believes there will be continued development in the city centre:
 
“There is clearly an appetite for purpose-built accomodation from students and investors in Nottingham. There is now a focus on the next university intake for 2013/14. We are already working on a number of schemes nationally, as well as in Nottingham which are proposed to be delivered for September 2014, highlighting that demand is expected to continue.”
“This trend successfully takes obsolete office stock and creates a new life for these buildings.  It's a win win situation for everyone.  It frees up family housing and contributes towards the economy of our city centre, and if there are more beds within the city there is rental competition, which can make Nottingham a more cost effective student location."