Analysis of Residential Leasing & Hospitality Market - Report Example

Analysis of Residential Leasing & Hospitality Market al affiliation: Introduction The of oxford has adopted sound land use practices in terms of its development patterns. Therefore, zoning has been effectively implemented giving rise to an organised and well-developed city. It is also notable that the residential development has taken prominence as being the primary land use all over the city. The residential land use is estimated to comprise of approximately 38 percent of the overall land use developments. Mixed-use developments are also common in this city (Burton, Jenks& Williams, 2013). Although there is scarcity of land that is undeveloped, the pressures arising from the level of development projects has continued and is projected to continue. Certainly, this can be attributed to the foreseeing population increase in the city. The increasing population, therefore, accentuates the undeniable need for more residential units in order to match the growing demand. Since the undeveloped land is inadequate, in the future the supply of the residential units in the city of Oxford will be inadequate in comparison to the demand. Characteristics of the residential leasing market 1. Better Performance Residential property is a very economically rewarding venture. It is because of the way it offers a higher long-term growth in regards to its value as compared to other assets of investments. Residential development is considered to be the best performing for longer time scales over the past 30 years in the United Kingdom. When we analyse the population increase rate in Oxford city, we realize that the residential business will continue to flourish even in the coming years. For example, the population of the period between 2001 and 2011, it was ascertained that the population grew intensely by a margin of 16,500 residents. The projected growth for the period between 2011 and 2021 is estimated to increase the population by 13,000 residents. This population bulging is a clear indication that Oxford city will continue increasing the countrys residential performance in terms of revenue/returns earned by investors. 2. Low Risk The leasing of residential units is a venture that is being associated with low risk as compared to other forms of investments. It is not only a low- risk investment, but also a high return asset investment which continues the more to increase the countries revenue. (British Property Federation, February 2013) Demand factors and parameters of the leasing market It is vital to note that the housing market in the UK is referred to be volatile (Campbell & Cocco, 2007). Like in the past decades, there have been two major booms and busts experienced. These fluctuations have been described by the figure 1 below just to illustrate house inflation is common and how it highly impacts the housing markets. As observed from the figure above, the periods of economic recession are fewer but have huge negative impact on businesses. It is also evident that residential property investments enjoy larger period (Years) of economic success, that makes the investment economically viable and rewarding. As a Real Estate developer in need to construct residential units for lease in oxford, I will be forced to evaluate on some of the demand factors, which influence the leasing market. There are diverse components in the markets that interactively contribute to the success of such a mixed project investment. Some of these parameters that make this city a perfect one can be influenced greatly by the factors below; a) Availability of University The presence of the University of Oxford is such a demand-pulling factor that makes this city ideal to develop a medium to high-density structures. Such developments will be able to accommodate the rising admissions of students every year because of the vastness of this institution. This University consists of diverse institutions in it that includes a total of 38 constituent colleges which are organised into four divisions. More so, they all comprise of full academic departments, and they are also self-governing institution, but they are part of the university. Each college is mandated to control its affairs as well as adopts its internal structure. Having such a number of colleges makes it attractive to build these accommodation units to tap into this growing market of students that is reliable since the returns will be rewarding. b) Historical sites attractions Oxford City is highly endowed with historical sites that are attractive to tourists. The variety of these historic locations should catalyse the process to put up a 4/5 star hotel because this is certain that the market to tap is already available. The development of modern facilities will meet the market demands for both present and the future. Some of these historic sites include; Pitt Rivers Museum, which is very famous for its prominent atmosphere which has adopted diverse culture of around the world both current and traditional. (Ashworth & Tunbridge, 2000) There is also AShmolean Museum and Archaeology, which is an ancient structure, established in 1683. It also serves as Britains oldest public museum and its among the oldest museums in the whole world (Graham, Ashworth& Tunbridge, 2000). c) Architectural designs The presence of building with unique and special architectural design is also a pull factor myriad of tourist from all over the world. Buildings like Sheldonian theatre is a very popular tourist destination which is well-known and admired for its ability of having one of the excellent panoramic view. This structure promotes enjoyment because it usually facilitates catching view of the oxfords famous skyline especially from its cupola. Inside there are tourist guides who help tourists learn about the history of the theatre (Rounce, 1998). d) Availability of parks A notable one is the Shotever Country Park, which exists at the periphery of Oxford offers a serene atmosphere full of beauty and history that makes it a place to relax and have fun and interact with nature (Ashworth & Voogd, 1988). It has distinct features like spectacular views, intimate mosaic a pattern of valleys and the existing landscape, vast habitats for wildlife. These parks continue to make the city of oxford the ideal place for erecting the 4/5 star hotel. Supply of Residential Units for Leasing and Hospitality Rooms Supply of residential units can be said to be below the anticipated levels, therefore, increasing the demand in place. There are rental pressures experienced in the city of oxford, and this is because private-rented dwellings failed to meet the desired levels of decent housing according to the English Housing Survey. Therefore, more supply in all range of tenures can play a fundamental role in uplifting the quality of the private rented housing (Glasson, 1994). It is fundamental to clearly note the imbalance between the existing demand and supply in the residential property can be reduced by addressing issues of rental affordability. The appropriate method to strike a balance is through creation of new housing stocks especially private rented residential units. Conducted researches suggest that there are distinct values depicted from the survey of hotel markets in the city centre and out of the city centre in Oxford; therefore, they record difference performance levels. It was also established that a 4-star hotel on the periphery of the city tends to achieve annual room occupancy of a higher average. Also, they record lower average achieved from the room rates as opposed to the 4/5 stars in the city centre. Hostel accommodation showed glimpses of strong and growing markets particularly in the centre of Oxford. There are high occupancy levels experienced in the existing hostels which are been increased by group bookings, as well as the weekend business from both individuals and families. Service apartments also recorded a strong market particularly in the city. Therefore, it was considered as an option to the hotel accommodation. The business people who flow in big numbers both during weekdays and over the weekends promote the occupancy levels. Therefore, future prospects deduced from the research suggested that there is a strong potential for growth for the hotel as well as short stay accommodation together with hotel development (Hotel Solutions, November 2007). Main suppliers in the market 1. Oxford City Council The city council offers a choice based lettings that are used to allocate social housing, and it is based on advert scheme. This system adopted by the city council gives the clients the opportunity to choose the nature of housing that will suit their needs rather than being dictated on the kind of house to take. The council applies Allocation Scheme policy to allocate these houses in Oxford. There are always more housing applicants as opposed to the available houses to let and therefore this necessitates the houses to be leased to those with high housing needs (Oxford Register for Affordable Housing, March 2007). 2. Oxford Citizens Housing Association Ltd This firm was formed back in the year 1866 with the aim of providing houses for people who are residing in Oxford and its surrounding. Up to date this company can boast of its diversity in providing quality homes to more than 3,000 households distributed in six local authority areas. 3. Campus Advantage Campus Advantage is a real estate firm which is Austin-based that has been involved in providing student housing. It encompasses facets like management, acquisition, development as well as consulting services. This firm works with the view of developing enhanced partnerships with colleges, universities by linking them with investors and owners. They do this in order to promote the academic excellence for the students within Oxford. 4. Carter Carter is a well renowned leading real estate firm that boasts of its great experience and creativity through its undertaken projects, which have improved the lives of communities in Oxford. This investment normally deals with mixed used developments and multi-family projects and also it engages in the development of student housing for example Highland Square found in Oxford. 5. Chance Partners, LLC Chance Partners, LLC an award-winning real estate company which channelled its speciality to build high-quality multifamily housing communities in addition to storage and retail facilities. This company is driven by developing communities that integrate perfectly with its perceived surrounding. This firm has a history written for its impressive record of developing more than 600 mixed use& multi-families and developing an urban-focussed retail space which is over 250,000 square feet (Campus Advantage, 2012). Relationship Between leasing and hospitality in Oxford city In oxford city, there exists different types of accommodations that encompasses; holiday cottages, farmhouse barn conversions, city centre apartments, well-appointed studio flats among others. Leasing of residential housing is precedes signing of a lease agreement, which clearly stipulates the rent that will be, payable to the Lessor during the period of stay. Besides that, security deposits are also paid, and the lessor acknowledges the receipt. Thereafter the occupant of the premises is entitled to enjoy quite environment as well as use the premises in the best way possible while maintaining the required number of occupancy recommended. In addition, the lessee is required not to make any alteration or improvements to the leased property. Hospitality is a phenomenon that directly deals with the relationship between two people, for instance, the host and the guest. Although the hospitality has always been geared towards providing a memorable experience in the hotel industry, surprisingly there is no standard or valid way to measure the level of hospitality (Morrison & Gorman, 2008).) Hotel hospitality in Oxford encompasses three facets; personalization that includes hotel staff treatment, security of all the guests, maintaining of eye contact during conversation, extending a smile during service to customers. Comfort includes making sure that the comfortability of the rooms were conducive) and warm welcoming (walking guests to their hotel rooms after checking in, giving warm welcome right at the door step). Of the three elements, personalization is the most vital element, which has to do with treating all guests whether local or foreign in a respectful way (Maghzi, Ariffin & Aziz, January 2011). The relationship There are self-catering accommodations within and around oxford that form part of hospitality facilities. They are usually accessible for short term leasing. They offer all comforts that you may enjoy in your home and therefore ideal for holidays or visits by business people/academicians. (OXLink Ltd, 2010) The table 1 above shows the different classes of hotels grouped into 3, 4 and 5-star hotels. Besides them, are the numbers of rooms. (Trip Advisor UK, 2014) Occupancy Level An analysis of 456 hotels in the UK showed that the hotel industry was able to maintain a steady rate of growth. It was revealed that the daily rooms in 2013 yields increased by 2.6% from the year 2012 to £81.50. The occupancy level showed outstanding factors and it rose from 75.6% recorded in 2012 to 77% in 2013. This was the highest occupancy level documented for years. The compound annual growth rate (CAGR) for a five-year period for rooms is shown in the table above. During this period, the rooms yielded a growth of 4.3%. The AARR for the hotel sector only managed a slight growth rate of only 0.8% from £105.08 in 2012 to £105.88 in 2013 (BDO, 2014). Seasonality of the Hotel business As per the research study done, it was established that the hotel market proved to be more seasonal towards the hotels in the city centre as opposed to the ones in the periphery. An Observation made unveiled that the occupancy levels in the hotels were high for the larger periods of the year. Low peak seasons were noticed to hit the hotel industry during the months of January and February and in December for selected hotels (Hotel Solutions, November 2007). Demand and Supply Institution 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 Oxford University 17,705 18,160 18,355 18,135 18,535 18,690 18,670 18,830 18,830 18,830 Oxford Brookes 12,955 12,690 12,770 12,640 13,085 13,470 13,540 13070 13,070 13,070 These universities in Oxford city have been recording increases in their admission annually as shown in table 7 above. This continuous admission means that the need for accommodation is on the rise and need to be taken care of for sustainability. For example, Oxford University is usually able to provide only 75% of accommodation to its students meaning that 25% is unfortunate to get university accommodation. Going by our statistics of the academic year 2012/13, 25% of the student who misses accommodation is about 4621. Therefore, this forces students to seek for outside accommodation from private sector or commute to their homes. When we reference Oxford Brookes University; the situation is a little bit worse. As a result, the university leaves 67% of students admitted on fulltime basis with no accommodation a figure that tallies at 8,773 of the total admitted for the academic year 2012/13. Therefore, this show residential demand of houses from the private sector is key to facilitate the academic success of the students (Jones Lang Lasalle, April 2014). Supply gap Demand for accommodation from the students’ fraternity in both the Oxford/Oxford Brookes Universities is a clear indication that the university community are unable to provide adequate accommodation. The few accommodations present have led to lots of students being left hence they have to turn to the private sector residential for their accommodation. The situation is worsening because the universities’ enrolment allocates a fifth of their vacancies to international students. The increased enrolment has no sign of ceasing, and it is attributed to the financial benefits accrued by the university from these kinds of students. Hence, this puts more pressure to the residential sector to provide more houses for students to lease and study without worries. Therefore, investors need to act fast to help close this gap and capitalize on the already present market. (Jones Lang Lasalle, April 2014). New Housing Development in the City of Oxford The Council of Oxford is in the process of investing a total £17millionto develop new homes for people in their area of jurisdiction. They are to build 113 homes for leasing that to be in five sites in the city. Their homes are expected to be affordable to their beneficiaries. The table below states the site and its description; (Oxford City Council, 2014) Future Developments in Oxford There is a long-term plan to build to build Oxford Garden city which is a proposed new settlement to be located to the South West of Abingdon. The project is anticipated to fall on a site which exceeds 2000 hectares and which has minimal environmental impacts. These settlements are viewed to enhance and deal with the problem of future housing. The site to accommodate this garden city will be in a position to hold over 30,000 houses in addition to hundreds of hectares for land of employment. (Dijksman Planning, 2014) Leasing Cost Oxford was pointed out to be the seventh in ranking among the most expensive cities particularly for renters all in the UK. A report by Insurer Endleigh revealed that the average rent in the city is £891 for a month. This figure is estimated to be £185 more as compared to the average rent for a month in the rest of the country. Therefore, this means that the annual average cost to lease a house or a flat in the Oxford city is approximately £10692. (Oxford Mail, 2012) Rules and Regulations Affecting the residential and Hospitality sector in the UK. a) National Assistance Act, 1948 Section 22(1) stipulates that if a person is offered accommodation under the part 3 of this act then the Act gives a provision for them to be charged for being accommodated in the premises. Section 22 mandates the local authority to fix a standard rate for the accommodation. In a situation of inability to pay for the services offered, the local authority will ascertain their inability to pay and what amount they will be charged. b) National Health Service Act 1977 This Act promotes provision for accommodation majorly for people who were in a position to live more independently. Nevertheless, the people required a given degree of care and associated support and included people who are under the pension age. Therefore, the Local authorities were forbidden to charge for accommodation stipulated under this Act. They were empowered to enforce reasonable charges where necessary but were inhibited from assessing the residents ability to pay. (Government of United Kingdom, 1977) c) The Food Standards Act 1999 The Acts main objective is to set up Food Standards Agency which will empower it to perform certain functions. It will also help in the transfer of other function that is closely linked to food safety and standards under other related Acts. Therefore, the agency is mandated to protect public health in relation to food. d) General Food Law This law gives the legislation that guides on the general food imports and exports, safety, their labelling, traceability and product withdrawals together with recalls. e) Building Act 1984 Building Act can be termed to be the primary legislation, which all building regulations are dependent. The powers of this Acts provides for setting the status of approved documents, demolition of buildings, roles of approved inspectors, enforcement of the building regulations in place, powers governing entry to premises among many more. f) Sustainable and Secure Buildings Act 2004 This Act was introduced to give new powers and requirements in relation to a given scope of building-related aspects. It covers issues of concern like sustainability, crown buildings, enforcement measures, security, historic buildings, removal of exemptions among others (Government of United Kingdom, 2004). g) The Building (Local Authority Charges) Regulations 2010 These regulations came to replace the existing legislation of the Building (Local Authority Charges) Regulations 1998. These new regulations allow the local authorities to set their charges in a scheme, and this is to be done in respect to full cost recovery mechanisms associated with their main building function as per the building regulations. Conclusion Having clearly analysed the demand factors as well as supply parameters it is right to conclude the city of Oxford offers enough of the necessary pull factors which would attract any investor to venture in real estate business. The market demand and response is already there favouring the aspect of increasing supply with the assurance of earning high returns. The presence of universities ensures that demand for residential units is high. The vast tourist attractions contribute the more to the idea of developing a 4/5 star hotel to supplement the high number of both local and foreign tourists that visit the diverse attraction sites. Therefore, I would recommend this city to be more than is ideal for this nature of investment. References Ashworth, G. J., & Tunbridge, J. E. (2000). The tourist-historic city. London: Routledge. Ashworth, G. J., & Voogd, H. (1988). Marketing the city: concepts, processes and Dutch applications. Town Planning Review, 59(1), 65. BDO. (2014). The Guide to the Performance of Hotels in the UK. London. British Property Federation. (2013). Investing in Residential Property. London, Routledge. Burton, E., Jenks, M., & Williams, K. (Eds.). (2013). Achieving sustainable urban form. London: Routledge. Campbell, J. Y., & Cocco, J. F. (2007). How do house prices affect consumption? Evidence from micro data. Journal of Monetary Economics, 54(3), 591-621. Campus Advantage. (2012). Campus Advantage, Carter and Chance Partners Break Ground on New Student Housing Community in Oxford, Miss. Oxford. Dijksman Planning. (2014). Oxford Garden City:Proposed New Settlement. Oxford. Fransham, M. (2014). Oxfords population is growing at its fastest ever. Retrieved November 4, 2014, from http://www.oxford.gov.uk/Library/Documents/Statistics/2014_02_populationgrowth.pdf Glasson, J. (1994). Oxford: a heritage city under pressure: Visitors, impacts and management responses. Tourism Management, 15(2), 137-144. Government of United Kingdom(1999); The Food Standards Act Government of United Kingdom(2002); The General Food Law Regulation Government of United Kingdom. (1948). National Assistance Act. Government of United Kingdom. (1977). National Health Service Act. Government of United Kingdom. (2004). Sustainable and Secure Buildings Act. Government of United Kingdom. (2010). The Building (Local Authority Charges) Regulations. Graham, B., Ashworth, G. J., & Tunbridge, J. E. (2000). A geography of heritage: Power, culture, and economy. Arnold; Oxford University Press. Hotel Solutions. (November 2007). Oxford Hotel and Short Stay Accommodation Futures. Oxford, Oxford University Press. Jones Lang Lasalle(April 2014) Oxford Demand Report Maghzi, M.Ariffin, & Aziz. (2011). Understanding hotel hospitality and differences between Local and Foreign Guests. International Review of Business Research Papers, 340-349. (Fransham, 2014) Morrison, A., & OGorman, K. (2008). Hospitality studies and hospitality management: A symbiotic relationship. International Journal of Hospitality Management, 27(2), 214-221. Oxford City Council. (2014, July 15). New Build Council Homes. Retrieved November 7, 2014, from http://www.oxford.gov.uk/PageRender/decH/New_Build_Council_Homes.htm Oxford Mail. (2012, August 22). Oxford is one of the UKs most expensive places to rent. Retrieved November 7, 2014, from http://www.oxfordmail.co.uk/news/9885644.Oxford_is_one_of_the_UK_s_most_expensive_places_to_rent/ Oxford register for Affordable Housing. (March 2007). A Guide to Older Peoples Accommodation in Oxford. Oxford, Oxford University press. OXLink Ltd. (2010). Oxford City. Retrieved 4th November, 2014, from, http://www.oxfordcity.co.uk/oxford/home_accommodation_apartments_self_catering.html Rounce, G. (1998). Quality, waste and cost considerations in architectural building design management. International Journal of Project Management, 16(2), 123-127. Thomson, S. J. (2003). The role of leasing in UK corporate financing decisions, accounting treatment and market impact. Trip Advisor UK. (2014). Hotels in Oxford. Retrieved November 06, 2014, from http://www.tripadvisor.co.uk/Hotels-g186361-zfc3-Oxford_Oxfordshire_England-Hotels.html Read More