PBSA pioneer on student priorities, addressing the chronic undersupply and the main takeaway from his 30-year career
Nicholas Porter can be fairly described as grandfather of the modern purpose- built student accommodation sector as we know it.
He founded the Unite Group in 1991, when student accommodation was associated with ageing university halls and dodgy digs – the firm was listed nine years later and is today part of the FTSE 100. Porter went on to found Urbanest in Australia and then Global Student Accommodation (GSA) in 2013, amassing a portfolio spanning nine countries.
GSA now sits within parent company The Dot Group, which includes Porter’s other businesses – management platform Yugo, listings website Student.com, and lender Kinetic Capital. Expanding its global reach, in April the group completed its acquisition of CRM Students, making it the largest student operator in Europe.
Combined, the group has a presence in more than 180 cities across 35 countries, giving Porter a particularly expansive insight as to where the next opportunities are coming from.
React News spoke to Porter about his views on global student accommodation trends, and what might be next for the sector.
What would you most like to change about the student accommodation sector?
The industry has grown significantly over the past 12 to 24 months and is attracting more institutional attention. As investment continues, the student sector will need to become more sophisticated and transparent – similar to all the other major real estate asset classes. We are at an inflection point and that’s a huge part of our agenda.
There are 240 million students in the world, expected to reach 400 million over the next decade. It’s clear student demographics and demand for education is growing globally. The industry is resilient and delivers stable returns through economic cycles, which is now well understood by the investment community. However, there continues to be a chronic undersupply issue across European cities.
A wider range of product and price points is lacking for students today. This is contributing to the affordability issue for students, and the parents planning their education. At the most important time in their lives, we need to be part of the solution for the future.
Many investors are focused on growing platforms, rather than just owning real estate. Do you think this is the right approach?
I truly believe that, like in other industries, there are great real estate asset owners and investors, and there are great operational brands that deliver excellence to the customer. When brand is done well, it generates real value for the owner and the operator.
Brand will drive better NOI and higher growth/value to real estate owners. Once the brand proposition and operational excellence is understood, investors tend to seek third-party management.
"When brand is done well, it generates real value for the owner and the operator"
Yugo was launched in July 2021, when it combined the three operational student brands plus the US operations acquired in December 2020from GSA to become the only dedicated global brand and operator across student housing.
Being an independent operator unlocks brand power and allows the business to scale across global markets as a third-party provider. You can see other examples of this in the hotel industry, such as Host and Marriott.
Are affordability issues likely to impact the student market in the UK and Europe?
Overall, availability of accommodation generally is shrinking due to shortage of supply, and specific factors in the UK such as taxation reforms, regulation and traditional housing exiting the market. I believe it’s a deeper market that is working towards broader price points for students. I don’t see it as a barrier, it’s one part of the choice offered to students choosing where to live.
In our experience, students and parents are buying a window of time for the student experience, and demand remains at its highest level. Where students decide to live really matters – they want safe, secure locations with all the amenities you would expect from this generation of student. Across our global markets occupancy is high, with value placed on location, community and purpose – preferences differ by market, but the fundamentals remain strong.
What are the strongest trends you are seeing from students in their demands from an accommodation provider?
There is a growing trend for students to be associated with businesses and brands that have real purpose, who understand what they stand for, to help students not only navigate their education experience but to provide them with more tools and additional value to increase their learning opportunities to prepare them for the workplace.
This sentiment links to Yugo’s three core pillars – YugoEco, YuPro and YuGrow, which support environmental initiatives, personal/wellbeing development, and how to take the next steps beyond university life.
Through Yugo’s research, we’ve identified the three priorities that students care about most. They care about the planet, and what we can do about helping the planet. Students are increasingly environmentally conscious and prefer accommodations that incorporate sustainable practices, such as energy- efficient systems, recycling programs, and green spaces.
"Students and parents are buying a window of time for the student experience, and demand remains at its highest level”
They’re also worrying about getting a career after graduation. They want access to additional support services such as career counselling, mental health support, and academic assistance. Mental health during their university years is also important. Students increasingly want housing that provides facilities promoting physical and mental health, such as gyms, yoga studios, quiet study spaces, and wellness programmes.
Student.com, our online marketplace, has access to more than 1.5m beds on its platform and can analyse student trends including booking behaviour in destination/source markets. Our access to student data is extremely insightful and tells us the most popular cities, emerging trends each year, nationalities of students, educational courses etc.
We have seen an uptick in demand for students looking for greater flexibility in tenancies and semester stays, as students study globally with transnational universities. Also, political uncertainty around student visas and post-study opportunities is clearly causing students to consider where they study abroad.
Why did you acquire CRM, and what has it added to your overall business?
It all starts with our strategy to be the world’s leader in student living. The acquisition of CRM Students and the German-based student operations platform Upartments was a unique opportunity to strengthen our market position, and to bring opportunity to our teams and students on a geographical scale that no one has done before. We can move team members around the world like other major brands do in major industries.
The acquisition opens new markets to expand across Europe, while also delivering economies of scale on many fronts. This is a strategically important transaction for Dot that unlocks intrinsic value by expanding its third-party offering alongside Yugo and diversifying its long-term revenue streams across the student economy.
The transaction represents strong cultural alignment, providing the group with access to new partnerships and opportunities to scale across Europe, while leveraging Yugo’s operational expertise and Dot’s strong track record and leadership.
Do you have target markets for further expansion? And would this include other company acquisitions?
Yes, aligning with our growth strategy we will continue to organically expand into new markets and leverage our global experience and local knowledge. As a group, we specialise in global student living, which enables us to operate in cities from Sydney to Seattle.
GSA was the first international company to enter the student housing market in the US and doubled its footprint in less than one year, securing a $4bn joint venture investment with Morgan Stanley Real Estate Investing.
Overall, we look for a balance of acquisition targets, investing capital and organic growth.
Scale is clearly important to your business. What advantages does that bring?
We are not scaling for the sake of being a larger group –there are tangible economic benefits and multiple strands of competitive advantage that contribute to overall performance.
We have economies of scale and skill, human capital and operational expertise, increased buying power, and larger pools of data and access to information/intelligence which allows us to be authoritative at all levels – technology and operations, through to lending and investing in operations.
It also gives better access to investment opportunities, a broader reach, and opportunities for students and employees across markets, as well as the ability to invest in leading technology.
What are the main takeaways from your 30-year career in student accommodation that have helped you the most in your business?
The single biggest thing that has helped over the past 30 years is knowing that every year we get older and every year our customers stay the same age. This drives us to innovate and do better, look ahead and invest to a constantly evolving future – nothing stands still.
"Every year we get older and every year our customers stay the same age. This drives us to innovate and do better"
Making that difference by enabling young people who are our future has given us great pride in what we do. It’s a real privilege to witness some of their success.
Secondly, the importance of relationships and reputation is testament to longevity in any industry.
What factors do you think will define the next era of student accommodation, and how are you planning to take advantage of them?
We are setting and driving the agenda for the future as we see the continued global growth in access to education and the demographic explosion globally.
There is expected to be an additional one billion graduates worldwide by 2050, and a 50% increase in international students by 2027. Inevitably, this will attract more institutional investment into the sector.
Advancements in technology will be key, as well as access to data and information shaping the future of the industry. Brand power is hereto stay – research shows Gen Z places great emphasis on companies that have purpose and meaning, and this cohort will represent 25% of the world’s population by 2025 and currently are 27% of the US population, the largest student economy in world.
With our exceptional leadership team, global presence, investment in technology, institutional relationships and importantly our brand proposition across each business, The Dot Group is well positioned for the future.
