STACC News - Student Accommodation Newsletter
STACC News - Student Accommodation Newsletter
Newsletter on all things student accommodation
Safe & affordable
The need for safe and affordable student accommodation in South Africa has been a continuous challenge, for the Department of Higher Education and Training (DHET), the universities and the Technical Vocational Education and Training (TVET) colleges, as they have not been able to accommodate all qualifying students within their residences.
Purpose Built Student Accommodation
With the number of tertiary institution enrolments increasing yearly, and the number of student accommodation beds remaining stagnant, the shortage of Purpose-Built Student Accommodation (PBSA) has also been increasing. Calls to the private sector have previously been made, so that they can come forth and aid in the provision of student accommodation to alleviate the shortfall pressures that exist.
In 2017, Eris Property Group's Student Accommodation Team (STACC) was tasked to investigate student accommodation as a new asset class that Eris Property Group (Eris) could expand its knowledge and expertise in, and in an effort to reduce the shortfall in the number of PBSA beds. Seemingly, as more research was conducted, it was discovered that student accommodation as an asset class is a growing portfolio globally.
Global Trends
The need for dedicated research
Trends from the United Kingdom (UK) and United States of America (USA) showed that the asset class has shown great returns and there are opportunities to list some of the well performing portfolios on the stock exchange. Over the past few years, there have been possibilities of student accommodation listings on the Johannesburg Stock Exchange (JSE), which shows that the student accommodation market in South Africa will probably follow the same trends analysed abroad.
The STACC team's strategy for student accommodation was approved in the same year of 2017. The STACC team has grown since its inception, with additional members that were added onto the team, to ensure that decisions that are made are more efficient and informed. The STACC team now has evaluation systems, that enables the team to evaluate the various opportunities that are sent from external and internal brokers, as well as those that the team uncovers, in less than a week. This allows the team to respond to opportunities quickly and ensure not too much time is wasted on opportunities that don't meet their requirements. The team added a dedicated Market Research Analyst that goes into intense research of each opportunity and the target market. The Analyst also commissions "On the Ground" research where students in the targeted area are interviewed to get in depth knowledge of what the students in that area deem as the most important features for a student accommodation in that area. Once the deal has been built up, our team of experienced Development Managers and Property Managers, together with the STACC Team come together to deliver the opportunity within the stipulated times and costs, while underwriting the capital costs.
All the student accommodation developments that are investigated by the STACC team follow the following 6 design principles:
- Convenient Locations
- Affordability
- Safety and Security
- Quality Accommodation
- Health and Safety
- Great Student Experiences
Design Principles
These principles, the NSFAS minimum norms and standards, together with the information of the needs and wants of the students gathered from the "On the Ground" research are prioritized as the design fundamentals for all student accommodation developments. However, the basic design developments revolve around green buildings, as we consider the life - cycle of each property and achieving green efficiencies. Therefore, each student accommodation development by Eris will be Edge Certified according to the criteria set by the body which was an innovation by the International Finance Corporation (IFC) for resource efficient developments.
Tech driven
Eris developed Rise Student Living as the management brand for all student accommodation opportunities under its umbrella, to separate the student accommodation management brand from Eris (which is the brand mostly known for commercial property management). Rise Student Living resonates more with students and brings a vibey and more relatable language to the target market. The brand has been well received and has been doing well since its inception. The Rise brand lends itself to positive connotations such as "Rise Up, Rise above" etc., which we also use to positively motivate students to achieve well while staying with us. The name Rise comes from the Eris name, when you move the E to the back the word Rise is created.
Impact Investing
A target for investment funding aimed at the investment for student accommodation was set for up to R2 billion in 2018. With Eris' years of experience in Investments and Fund Management, a total of R1.265 billion has been raised since, and an investment vehicle called the South African Student Accommodation Impact Investments (SASAII) was formed to roll out student accommodation at universities in South Africa. The funding vehicle has mandated Eris to find opportunities and develop student accommodation that targets 75% of the beds developed to be at the NSFAS rate of that university as part of its social and impact investing initiatives. Eris's design principles strive to develop student accommodation that is not only of high standards but is also affordable to all students.
SASAII is funded by institutions that have always had a vested interest in creating an impact in the market. What better way to consider developing student accommodation for students that cannot afford student accommodation, let alone tertiary education. Through the investment platform the institutions are carefully ensuring that students are afforded other opportunities such as financial literacy and actual real work experiences. Not only are they investing in opportunities for students to be safe but ensuring that students are given an actual platform for a steppingstone to their futures. The institutions invested in the platform are the IFC, Momentum Metropolitan Holdings Limited, Investment Fund for Developing Countries (IFU), Eskom Pension Fund and the Government Institutions Pension Fund (GIPF).
Our first Impact
Eris started their endeavors in student accommodation in 2018, with its first development, based in Hatfield, Pretoria, providing 988 beds. The development has been doing well since its date of opening in 2019. However the development nearly saw occupancy shortcomings during the year the Corona pandemic broke out in 2020. But due to students wanting to be in an environment that promotes safe learning, despite the pandemic, the building was 85% let in that year.
Eris was also the developer for Avenue Road that was developed for the University of Cape Town that was completed in 2021. The development was a construction tender which Eris won and priced competitively against contractors that had bid directly for the tender, proving that Eris are all rounded Development Managers, that ensure they are competitive and are proficient. The 500-bed development that included a dining hall, was accredited as the first Green Star rated student accommodation development in South Africa.
Further to that, Eris has now broken ground on the development of two new student accommodation facilities. One based in Johannesburg targeted to house students from Wits University called Units on Jorissen, and the other in Cape Town, Units on Cape Station with Cape Peninsula University of Technology (CPUT) being in close proximity from the facility. The two developments will add 4 000 beds to Eris' developments portfolio, bringing the total accumulative number of beds to 5 066 by 2024. See more details on the development below.
Eris has a very strong pipeline in which it foresees that it will be able to add an additional 7 000 beds, over the South African landscape in the next 5 years.
Units on Jorissen, Braamfontein
Number of beds: 998
Intake: January 2024
Developer: Eris Property Group & Feenstra JV
Units on Cape Station, Cape Town
Number of beds: 3 085
Intake: January 2024
Developer: Eris Property Group
Hands On
Hospitality orientated property management services
Student accommodation has evidently shown that it is highly management intensive, which plays a big role on the success of the development. The management requires hands on, semi hospitality orientated property management services, such as Wi-Fi, utilities, laundry, computer labs, gyms, larger staff compliments, more "soft" people issues such a student life programs and wellness programs. That is why Eris has invested in its management systems and intensified its usage to be able to cover the fundamental functions required to let out, as well as manage the facilities. This has given the organization an edge to even start managing third party student accommodation facilities. Eris now manages a portfolio for a third party, and we have room for more on our systems.
Student accommodation has very tight budgets that developers need to make work especially with the low NSFAS rentals that are paid at some universities. These rentals are making rolling out student accommodation in some areas very challenging. NSFAS has made the decision to accredit PBSA facilities and cap the rate paid towards providers across all universities in the different geographical areas. These changes will create new dynamics in the industry. One change that Eris is excited about is that the new cap rate will afford universities and TVET colleges that are in peripheral areas an opportunity to have PBSA facilities constructed in those areas, where providers were previously not able to develop facilities at the historic low rates at those institutions.
NSFAS has also announced that they will be taking on the administration processes of accrediting student accommodation providers at universities, as well as pay service providers directly, on time. Should the app work accordingly, this will bring more confidence to the industry. However, it is important that the app and introduction of the new procedures be done in consultation with universities and service providers so that it can efficiently take off, with minimal disruptions to the existing systems. Eris will continue to observe the changes that are being made in the industry and ensure that we adjust well and to be able to continue providing safe and affordable accommodation for the market.
During the year, Eris will be releasing a report with some of its findings in student accommodation in South Africa, which we are excited to share with the market. Please be on the look out on our website and social media platforms for the release date and report.
