Student accommodation sector booming

Student accommodation sector booming

19 April 2019

The influx of international students is fuelling demand for new Purpose Built Student Accommodation (PBSA), with developers now vying for properties traditionally considered prime office projects, reports The Sydney Morning Herald.

With the faltering housing market has left many off-the-plan developers in a bind as they battle to get projects off the ground with fewer pre-sales, alternative property developers with a focus on aged care and student accommodation are filling some of the demand for large investor-grade sites.

At the start of this year, there were 87,052 student accommodation beds across Australia’s eight capital cities, and Savills Australia projects the number will increase by 32 per cent to 114,750 by the end of 2022.

But with international student enrolments at Australian universities growing exponentially, the student accommodation boom won’t be able to keep up with the strong demand for beds, Paul Savitz, Savills’ director of student accommodation, said.

“There’s still a major undersupply and we haven’t even factored in domestic students,” Mr Savitz said.

“And in Melbourne, even though we have a historical high of new supply, it doesn’t get under the skin of the supply issue.”

Despite an extra 13,000 beds—46 per cent of the current student accommodation pipeline—to be built in Melbourne over the next four years, the Victorian capital will still have the biggest deficit in 2022, with 5.2 international students per bed, notes the AFR.

Sydney, with another 3,600 beds to be delivered by 2022, will have 4.7 international students for every purpose-built student bed.

The number of full-time international students soared by 94,630, or 41 per cent. between 2012 and 2017.

In addition, there are 121,500 mobile inter-and intra-state domestic students living away from home for opportunity and lifestyle reasons.

The focus of new investment in the sector has been centred on the Group of 8 (Go8) universities, which account for five of the top six universities by overseas intake, and about 40 per cent of all overseas enrolments, up from 30 per cent 10 years ago.

“Across the Go8 grouping overseas enrolments have grown 64 per cent since 2012, compared with total overseas enrolment growth of 32 per cent over the equivalent period, highlighting the attractiveness of Australia’s leading universities to international students,” Savills Student Accommodation Director, Conal Newland, said.

There is also a growing trend for developers to focus on premium accommodation options.

For example, the Urbanest at Lendlease’s Sydney Darling Square precinct, recently set the bar high by also offering full-house catering to the students in an inner-city location.

Unlike most traditional student digs, the new site will offer The Eatery at Urbanest Darling House, which will have chefs from a wide range of backgrounds serve up a diverse and multicultural menu, changing weekly.

Another potential site is by Sydney developer Britely, which plans to convert a 850 square metre site in the Sydney university suburb of Kingsford into a student accommodation and commercial complex worth $50 million.

Meanwhile, investment manager AMP Capital has struck a $700 million concession-style deal to take control of an extensive portfolio of student beds at the Australian National University in Canberra.

Late last year they struck a smaller, similar $300 million deal with the University of Melbourne for two newly developed student dormitories, allowing them to collect student rents for the next 40 years while being responsible for the upkeep of the accommodation.

International education in Australia is the country’s third largest export industry, behind iron ore and coal, raking in $32.4 billion for the economy, and overseas investors are eager to take advantage of the emerging asset class, Mr Savitz said.