Nationwide shortage of student digs

Nationwide shortage of student digs

29 August 2019

The supply of purpose-built student accommodation is not keeping up with demand, with the shortfall forecast to pass 45,000 beds in Sydney and Melbourne combined next year, says the AFR.

According to Knight Frank’s Global Student Property 2019 report, more than 25,000 new PBSA bed spaces have been created since 2015, with an estimated total of 105,000 PBSA bed spaces now on hand nationally.

The sector, which is “playing catch up” to support the growing mobility of both domestic and international students, also has almost 30,000 purpose-built student accommodation beds in the construction pipeline, which will come online over the next four years.

But with international student enrolments at Australian universities growing at an exponential rate, the student accommodation boom won’t be able to keep up with the strong demand for beds.

The shortfall in student beds this year in Sydney and Melbourne combined will pass 42,000 this year. By 2023 it will tip past 50,000 beds, on Knight Frank forecasts.

“Around 8,290 new beds will be delivered this year, with Sydney, Melbourne, Brisbane and Adelaide accounting for 80 per cent of this new delivery, with the remaining 20 per cent distributed across Hobart, Geelong, Wollongong and Cairns,” said Ben Burston, Knight Frank partner and head of research and consulting.

“Demand in Australia is rising due to a range of factors, including ambitious government enrolment targets, consistent growth in international student numbers and a significant increase in state-backed university funding,” he said.

“Despite some growth, demand is expected to outstrip new supply over the long term. A scarcity of developable land in close proximity to many Australian universities remains a barrier to increasing supply, with many institutions situated in urban locations.”

The QS Best Student Cities 2019 report ranked six Australian cities among the global top 50, with Melbourne in third place behind London and Tokyo.

Highlighting the underlying quality of the student experience on offer in Australia, Sydney came ninth in the QS survey, while Brisbane was 22nd, Canberra 23rd, Adelaide 26th, up 15 places, and Perth 41st.

Education is the country’s fourth largest export at around $35 billion, behind iron ore, coal, and LNG.

Institutional investors have pushed strongly into the sector, backing players such as Scape, which has a 10,000-bed pipeline spanning Melbourne, Brisbane and Sydney.

Scape is on the way to becoming the country’s largest purpose-built student accommodation (PBSA) provider with 2,500 student rooms open already and more than 8,000 rooms in development, says the AFR.

In all, the Scape’s business plan spans 18 properties built or in development, accommodating close to 11,000 beds and creating $4 billion in assets under management over the next 5 years.

The provider has begun construction at four sites for more than 2,500 student rooms, including the world’s tallest student accommodation tower at 99 Franklin Street in the Melbourne CBD. The 175-metre tall tower is on track for to open in 2021 with 950 student beds.

Scape Australia executive chairman Craig Carracher says students from countries such as Malaysia and Indonesia are driving demand.

He cautioned, however, that growth might not remain as high, but even so bed numbers were still not keeping up.

“At present the total number of new students is still a multiple of the number of beds being delivered in the purpose-built student accommodation space,” he said.

Other local players such as AMP Capital and Cedar Pacific are also investing heavily in the student accommodation sector.

In two recent concession-style deals, totalling more than $1 billion, AMP Capital invested in a student dorms portfolio at the Australian National University’s Canberra campus and in one under development by the University of Melbourne.

Brisbane-based developer, Cedar Pacific, recently cut the ribbon on the first of three state-of-the-art student towers it will open in Melbourne over the next 12-18 months – a 410-bed development in North Melbourne.

Drawing on equity from overseas pension funds, the company has become one of the nation’s biggest players in the burgeoning sector with a multi-billion-dollar portfolio comprising student accommodation buildings in Brisbane, Adelaide and Melbourne and an ever-expanding pipeline of projects.

Other national student digs players include UniLodge, Campus Living Villages, Urbanest, Atira, and HRL Morrison.