There’s going to be a new player on the U.S. student housing scene.
Scape Student Housing Ltd was founded about a decade ago in the U.K. and later expanded to Australia—and now the student-housing developer and operator has set its sights on the United States. Scape USA recently opened its headquarters in Boston, a city known for its high number of universities, and has plans to open 20,000 beds throughout the country.
The outlook has remained stable for the student-housing sector, though there have been concerns of overbuilding in some markets. In the fall student-housing rents grew, but not as much as they have in other years, thanks to increased competition from new projects.
Unlike many of the operators looking to build in markets with lots of land and students—think many of the big state schools—Scape has taken a different approach: it focuses on providing student housing to urban infill markets. Scape has invested more than $3 billion of capital and has more than 12,500 student housing beds in operation or in development in the U.K., Ireland and Australia.
Scape’s website has pricing and sizing information for its existing rooms. In the Greenwich section of London, for example, a “medium studio” can be rented starting from £250 per week ($321) and includes a kitchenette, study area and hidden storage. The site says a “standard studio” measures about 150 sq. ft., a “medium studio” is about 172 to 193 sq. ft., and a “large studio” is about 226 to 333 sq. ft. (NREI converted the original metric measurements into values used in the U.S.).
NREI chatted with Scape USA CEO Andrew Flynn about why Scape is branching out into the U.S. and some of the ways it differentiates itself from other student-housing operators.
This interview has been condensed and edited.
NREI: To start, could tell me a little bit about Scape?
Andrew Flynn: While student housing as an asset class had existed for many years, it was typically at some of the larger state universities in the U.S., perhaps in the Midwest or down South, where there’s an abundance of land, and you can just build student housing buildings and the universities would be inclined to master lease them. And that was the model. It was a little bit commoditized. It was a little bit vanilla. But the opportunity that Scape identified, in the U.K. initially and then Australia and then as we enter the U.S., is that really where there’s an absence of what we call “purpose-built” student housing is in the true, downtown urban cores of these academic hubs, in these premier cities around the world. … What we really focus on is two simple core principles: intelligent design and intuitive service. And so the intelligent design piece, what that really means to us is that ultimately students are not spending a lot of time in their room, ultimately it’s a private space for study and sleep, but most of their university experience is outside of their rooms. So, we said, why don’t we right-size the room to that component of their experience? And so, we do focus on more compact rooms, but our view is that compact spaces that are well-designed don’t feel small. Whereas larger spaces that are poorly designed can feel vacuous. … The only ways these buildings really work is if they’re highly efficient, but they meet the needs of the end user. And from our standpoint, it’s very important that everybody in our building has a place to study and their own private kitchen, their own private bathroom and their own private space to sleep in their unit. … What you wrap around that are really special and impactful communal areas. … These are truly meant to be places that draw people, that act as collider space, where folks from different universities bash into each other and exchange ideas.
NREI: So you’re not looking at all at some of the big state schools where there’s an abundance of private student housing operators?
Andrew Flynn: That’s right. Our model is certainly focused on urban infill markets, where we can be complimentary to the great universities that already exist and thrive in those markets, where there’s really a housing shortage. Universities realize that they need to make sure that the housing stock available for their students is well aligned with their academic mission, with their academic enrollment. But also, there’s a lot of pressure exerted on the local neighborhoods, the communities where sometimes these students have sprawled out into these neighborhoods and have displaced some of the rest of the workforce and working families. We find that this product is needed for a variety of reasons, really in the urban infill markets. There are certainly other student housing folks who are active in some of the other Midwestern or Southern markets, and again, I think there are some folks who are very well qualified and very capable of what they do in those markets and that’s just a little bit different from what we do in our model.
NREI: Part of your model is that you try to have students from different universities stay in the same facility. How does that work with universities? Do you have direct partnerships with them or do you market on the side to students who are looking for off-campus housing?
Andrew Flynn: The way we perceive our relationships with the universities is that we don’t ask anything of them. And I think—and I would never want to speak on behalf of the universities—but I think as a general matter, universities sometimes get a little bit fatigued by developers knocking on their door and saying, “If I build a building, will you lease 500 units from us?” And I think that it often puts universities in a tough position. I think sometimes [universities are] not interested in leasing a building, although sometimes I think their housing needs are so acute that maybe they just capitulate and they enter a lease. I think that we’ve just never perceived that relationship between commercial operator and university as really the most fruitful for either party. And so, what we say is, we don’t ask anything of the universities. But I think what’s important is that while we don’t ask anything of them, we have very strong relationships with them and we certainly coordinate and partner with all of them in a variety of ways. In all of the markets we’re in, the universities request that we be on their preferred housing list, so that at least they can direct students in terms of students looking for off-campus accommodations, either because they want to move off campus or because in many cases the universities only provide housing to their freshman or their sophomore classes.
NREI: What made Scape want to enter the U.S. market after being in the U.K. and Australia?
Andrew Flynn: We were founded in the U.K. and we moved to Australia, where there was a large opportunity, particularly in Melbourne and Sydney and Brisbane. I think in many ways if you asked the Scape founders a few years ago, they’d say, “Well, we were never planning to go to the U.S. because the U.S. is the most mature real estate asset class in the world and they must’ve figured this out 20 years ago.” And I think, lo and behold, after doing our research for the past 18 months coast to coast, we were all intrigued and frankly surprised by the fact that similar to the U.K., similar to Australia, there doesn’t seem to be a group that has necessarily addressed the exact markets that we’re seeking to address. And then in a lot of these urban markets, the need is very palpable and very tangible. I think, again, our entry into the U.S. was a very deliberate one. It was a very measured decision that took a lot of time and a lot of diligence. … It’s a careful balance between execution and expansion, and I think that we will assess expansion opportunistically and strategically, but at the same time, we’re very focused that the first few sites that we pursue are well-executed. And just from a headquarters standpoint, we’re very pleased to have planted our flag here in Boston, which we perceive as the epicenter of American education, and we think that our brand is very well aligned with Boston and a lot of the core principles that Boston has really exhibited in recent years, including a real spirit of innovation and entrepreneurism and a deep knowledge economy.
NREI: What’s Scape’s vision for the U.S.?
Andrew Flynn: The plan is to scale to 20,000 beds nationally, and we have a commitment here in Boston. We’re committed to doing approximately $1 billion dollars of development. … We continue to actively assess opportunities locally, but we do feel confident that there’s a reasonable path to achieving both of those benchmarks both locally and nationally in the next five years.
NREI: Can you discuss any of the other markets where you’re interested in developing?
Andrew Flynn: I think at the moment there’s not necessarily a top-five priority list or any rank order of the next cities that we’ll pursue. I can tell you that we’ve been very active in terms of just making relationships on the ground and understanding the local student-housing dynamics in the large urban centers up and down the East Coast and the West Coast.
NREI: Like New York, L.A., or maybe the San Francisco area where there’s a lot of big, prominent schools?
Andrew Flynn: Yes, I think any of the cities that you mentioned are cities that we’d be interested in exploring at the right time or for the right opportunities.
NREI: Could you describe some of the amenities you are finding are most popular with some of your students in the U.K. and Australia?
Andrew Flynn: I think we really do pride ourselves on the amenity space in the building, and we really believe that that’s the beating heart of our buildings. Accordingly, there’s really not a strict set of parameters that every building needs to have these 10 things. We really try to customize them to the markets and the neighborhoods that they exist in. And some of that is climate-driven. For instance, in Brisbane, which is a sub-tropical climate, there’s a lot of outdoor space that’s used 12 months a year and a lot of that communal area is outdoor space. But also, in other markets where maybe there’s proximity to a great, world-renowned musical and arts institution—in that building we may have additional and in excess music rehearsal rooms and recording studios. So I think what’s important is that we really take a very hands-on and tailored approach to putting amenities in each building. And we want to make sure that they address, accommodate and are utilized by the whole spectrum of students that we’ll have in our buildings, from undergraduate to graduate and across all different kinds of fields of study.
NREI: Would you describe the Scape properties as luxury student housing? Do students pay a premium for these types of amenities and services?
Andrew Flynn: We specifically endeavor not to be a luxury product. We are well-designed and we believe that the aesthetics and the design of our rooms are really top-of-the-line, but we try to truly be a price-effective option and alternative in all of the markets we go in. In any market that we go into, we try to make sure that we are priced either in line or, in many cases, below the on-campus or the existing off-campus options. I think in any market really in the U.S. or globally, you’ll find there are those students who may be seeking that luxury product and whatever the percentage of those students is—that’s not our target market. We really are trying to be the affordable and aspirational part of the housing stock. The reason we can do that is because the units are a bit more compact. We focus on really designing these buildings efficiently from the inside out so that ultimately for the end user, a lot of those efficiencies and a lot of those savings can be passed on in a manner of a cost-effective price for the end user.
NREI: Is there anything that you wanted to say about the prospects for student housing as an asset class in general?
Andrew Flynn: We do view ourselves as both a newcomer and an outsider in many ways. There’s a lot of folks in the student housing asset class who are very good at what they do, and they’ve perhaps pursued and executed a different model over the past five or 10 or 20 years and I think there are some lessons we can probably learn from that. At the same time, we have a very bespoke model ourselves, and we hope to keep that, and we hope to be a good influence on the U.S. student housing market and address particularly this need in the urban infill markets.
