the class of 2020 - radar - interviews
TREND ANALYSIS
April 8th, 2020

Student accommodation industry confirms anticipation of a long recovery and speculates on the future of higher education post COVID-19

“It seems this current crisis may have a more lasting impact on higher education, which, in turn, may significantly impact the physical footprint/portfolio of many universities – or at least their pipelines. I wouldn’t be surprised if online and digital/remote education interest permanently increases after COVID-19.” says one survey respondent.

Highlights:

  • Industry stakeholders agree (75.4%) with The Class of 2020 partners’ anticipation (76%) of one semester or longer to return to business as usual
  • Apprehension on operations and finances rise, so does dissatisfaction on government response and support (58.7%)
  • Non-operators also comprehend the complexity with dispersed responses to how the operators should respond to the change in demand
  • Industry encourages thinking beyond COVID-19, with “an increase of digitalization”, “new type of internationalization” and a “rethink of current models” among popular anticipations

Following the first industry survey which captured a snapshot of The Class of 2020 partner operator sentiment on student accommodation industry two weeks ago, the questions were extended to the wider student accommodation industry stakeholders within The Class of 2020 network. There were 150 respondents representing Operator/Developers (34.9%), Advisors (16.9%), Suppliers (14.5%), Investors (13.4%), Academia (11.6%) and Other (8.7%), predominantly in Europe.

Q. Once the outbreak is contained how long do you estimate it will take for the industry to get back to business as usual?
Less than a month2.7%
2.7%
1-3 months22%
22%
One semester100%
100%
One academic year100%
100%
12-24 months9.3%
9.3%
More than 25 months2.7%
2.7%

The first survey by The Class of 2020 revealed an operator landscape bracing itself for a mid to long-term recovery, with 76% of respondents forecasting impacts into academic year 2020/2021. This survey’s results have demonstrated a similar sentiment within the wider industry, as nearly the same share of respondents (75.4%) predicted stabilization times to be longer than one semester.

Q. What are your organisation’s key priorities over the next 4 weeks?
In-house student/residents wellbeing100%
100%
Workforce health and safe100%
100%
Remote working capabilities100%
100%
Supporting/Streamlining operations5.5%
5.5%
Digital infrastructure & security5.1%
5.1%
Relations with higher education institutes4.1%
4.1%
Investor relations/financing9.9%
9.9%
Cash flow/cash management100%
100%
Projects under construction100%
100%
Expansion/Acquisition of new projects5.7%
5.7%
Customer acquisition and retention8.4%
8.4%

Resident wellbeing emerged as a clear leader among partner priorities in the first survey, with remote working, cash flow management and workplace health and safety tied on its heels. Priorities among the wider industry stakeholders this week have been more evenly distributed, suggesting the urgency with which top priorities were addressed and the evolution of priorities week-to-week. The persistence of cash flow as a top concern demonstrates the speed with which the industry has been hit by this crisis, and the close relationships and interdependencies between industry businesses, which has left few unscathed by recent developments.

Q. What is your view on the current level of your government’s response and support for the student accommodation industry?
Good100%
100%
Good but with focus on wrong areas/aspects100%
100%
Adequate100%
100%
Not sufficient100%
100%
Poor100%
100%

While above indications suggest that the wider student accommodation industry is proactively reacting to the uncertain situation, the dissatisfaction with government responses increased significantly. While 41% of the respondents considered government response to be ‘not sufficient’ or ‘good but focusing on the wrong areas/aspects’, which is not a significant difference from the previous survey (37%), 17.7% considers the government response to be poor, which scored 1.85% previously. In total, 58.7% indicated they are not satisfied with the current government response and support, suggesting differences in the speed and manner which the industry and government responses to the immediate impact of the outbreak.

Q. What areas should your government be prioritising to support the student accommodation industry?
Wage support for employees100%
100%
Financial aid/ loan100%
100%
Tax relief100%
100%
Other7.8%
7.8%

While The Class of 2020 partner operators advocated primarily for financial aid and loans for students (32%) and wage support for employees (32%) previously, the wider industry has called for tax relief in the form of revenue, income and property tax (37.1%). In addition to the wider pool of stakeholders included, it is worth noting that in the weeks since the first survey, many European governments have taken steps to offer financial support to students through guarantees and/or extension of their student loans or additional financial support for those out of part-time work. In the additional comments, one UK-based operator noted that “students are paying, as the government has given them the means to do so.”

Q. If you are a student accommodation operator, how have you responded to the changing demand?
Allowed students to cancel their contracts that returned home100%
100%
Provided discounts on rent15%
15%
Provided rent-free period5%
5%
Offered perks for bookers of room for next academic year100%
100%
Discounted rents for next academic year9.2%
9.2%
Anticipate lower occupancy for next year20%
20%
Other100%
100%

The big question in the media in the past two weeks has been whether operators should be waiving the rent of students who have left their accommodation due to the COVID-19 outbreak. 40% of The Class of 2020 partner operator respondents indicated they had allowed students to terminate contracts and cancel their rents. This week, 29.2% responded they are taking the same action however an additional 10% indicated other measures they are taking, many of them stating that either they are still in the process of finalizing the terms or reviewing each situation case by case. Only two responded that they are not taking any actions. Also, fewer (20%) anticipated lower occupancy next year compared to the previous 38%, suggesting industry is gaining less negative view while understanding the situation as the weeks go by.

Q. If you are not a student accommodation operator, what do you think they should do in response to the changing demand?
Allow students to cancel their contracts that returned home100%
100%
Provide discounts on rent100%
100%
Offer perks for bookers of room for next academic year100%
100%
Discount rents for next academic year100%
100%
Anticipate lower occupancy for next year27%
27%
Other1.7%
1.7%

This question was added in order to better understand the sample diversity. While 24.7% of non-operators indicated operators should allow students who have left to cancel their contracts, the lack of consensus on one clear response to the change in demand reflects a common understanding of the diversity of conditions in which operators are making decisions in the current situation. In fact, one respondent even noted “Answer options too simple. Complicated situation.” One point that 27% of respondents agreed on, however, is that operators should anticipate lower occupancy for next year in their response to the changing demand.

Beyond COVID-19

This survey was especially distinct in the quantity and depth of comments added which reflected a shift in perspective not just onto the next academic year, but towards the very future of higher education.

“Are we sure the current models keep working, or better think differently?” one respondent commented. “We anticipate several scenarios for the future such as an increase in digitalization and a different type of internationalisation in higher education,” another responded. Anticipating a drop in exchange students next fall, one respondent asked, “will this set a trend for future mobility?”

The Class of 2020 Student Accommodation Industry Sentiment Survey was conducted between 2-6 of April, with an aim to understand the priorities of our industry during this time of uncertainty. The survey is meant to represent a snapshot of the current student accommodation landscape, including a diversity of voices. The situation is evolving daily, as we are presented with shifting concerns, priorities and sentiments surrounding the effects of COVID-19.

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