Using serviced apartments for student accommodation - Crowe Ireland

Using serviced apartments for student accommodation


Using serviced apartments for student accommodation - Crowe Ireland
With occupancy levels in serviced apartments and aparthotels at an all-time low, could repurposing them as student accommodation provide much needed revenue? 

September is traditionally the month when new students are offered college places and existing third-level students prepare to return to their rented accommodation in advance of the academic year. However, COVID-19 is going to have a significant impact on the choice and availability of accommodation available for third-level students in the 2020/21 academic year.

Student accommodation tends to be a mix of staying at home, finding “digs” (where a room is traditionally rented in a private family home Sunday-Thursday during the academic year), renting apartments or flats, room shares and purpose-built student accommodation (PBSA). 

While purpose-built student accommodation has grown over the last number of years, the traditional model of renting private houses or staying in digs continues to be very popular.  These more traditional options were often chosen as they were deemed more cost-effective than some of the newer bespoke student accommodation. However, as private rented accommodation is becoming more expensive and difficult to find, and with many students and families potentially shying away from the private room option due to social distancing and COVID-19 restrictions, what are the options for students?

Apartment rental and PBSA

Over recent years, the housing crisis has become more severe, with average rental prices continuing to increase and demand continuing to grow. As of June 2020, the average monthly rent in Dublin was over €2,000. Anecdotal evidence suggests this housing crisis has pushed out students from the traditional student market, as property owners are demanding one-year lets as a minimum and prefer to lease to professionals over students.

In Dublin alone, the estimated third-level student population in 2019 was over 90,000, with 76,381 in HEA-funded institutions and an estimated 16,150 in private colleges. On the back of this demand, the PBSA sector has grown considerably, with approximately 16,000 beds currently in Dublin across 40-plus developments. Similar to serviced apartments, PBSA has evolved and offers an array of communal facilities such as on-site gyms, laundries, games rooms, workspaces, etc. 

While these developments may be appealing to students, as it gives them a sense of certainty for the academic year ahead as well as access to the facilities on offer, the costs are high and can range from €170 - €260 per week for a single room ensuite up to €400 per week for a larger studio-type room. Based on an academic year, the total cost can be in the region of €10,000.

Serviced apartments and aparthotels

Up to now, the serviced apartment market has been relatively small in Dublin, with approximately 500 serviced apartments in the city. To put this in context, this represents about 2.5% of hotel room supply, compared to 13% in Paris, Munich and Frankfurt and 5% in Madrid, Berlin and Amsterdam. However, the number of serviced apartments in Dublin is set to increase over the next number of years.

A serviced apartment is a self-catering, furnished apartment that provides a housekeeping service and a check-in service. Aparthotels are similar to serviced apartments, in that they are self-catering with housekeeping, but also have a food and beverage offering similar to a hotel. The sector has evolved considerably, with design-led, innovative concepts such as compact kitchenettes and flexible workstations, along with facilities such as gym, laundry, communal work and social spaces.

In Dublin, between serviced apartments and aparthotels there are approximately 1,200 units currently under construction due to open in 2021/22, and a further c. 1,800 with planning permission. The average size of these is set to increase from on average a 50-unit development to a 240-unit. The location of the new supply is concentrated in Dublin 1 and Dublin 2, close to all major transport networks and the city centre. 

This new supply, along with the additional estimated 3,000 hotel rooms scheduled to open between 2021 and 2022, will make for a very competitive market, as demand for leisure and corporate travel stays low.

An opportunity for the serviced apartment sector?

With the COVID-19 restrictions, many universities and colleges will be forced to explore a more innovative approach to teaching and learning practices. Third-level institutions will need to examine the safety of face-to-face and classroom-based teaching and possibly blend that with an online/offsite approach to deliver the syllabus in 2020/21. As a result, students may want to have a more flexible accommodation offering to suit their needs. 

One of the potential choices for students in the 2020/21 year could be to use serviced apartments. Serviced apartments and aparthotels offer quality facilities for students, many in well-located areas, but more importantly they offer flexibility in uncertain times (for example, allowing them opt for a week on week off). In turn, students offer a base level of business to serviced apartment owners who otherwise could face unprofitable occupancy levels. While the room rate may need to be discounted from corporate rates, students would provide a base of business that would not be there otherwise.

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Property and real estate is a core specialism of the firm.
Naoise Cosgrove, Managing partner - Crowe Ireland
Naoise Cosgrove
Managing Partner
Corporate Finance
Partner, Corporate Recovery - Crowe Ireland
Aiden Murphy
Corporate Recovery