This article is from the Australian Property Journal archive
MORE affordable student accommodation could play a key role in Australia remaining attractive to international tertiary students amid growing cost of living pressures, as the market prepared for a huge influx of new offerings over the next two years.
However, the Savills Student Accommodation Market Report for 2018 also suggests new investors and developers will come to the market looking to take advantage of the strong demand for student accommodation through 2019.
Savills expects projects to bring changes in the rankings of the top 10 providers of accommodation. Scape and Wee Hur in particular are tipped to make a big impact. Established developers and operators have looked to raise additional equity, including Scape and Wee Hur, as well as GSA and Cedar Pacific.
Scape recently acquired the 558-566 Swanston Street site on the Melbourne CBD’s northern edge, on which it is planning a 500-bed facility. It is also building an 800-bed facility at 97 Franklin Street, and a 650-bed project at 557 Swanston Street, on part of the former CUB site. It opened a 700-bed tower in February at 393 Swanston Street.
Melbourne’s pipeline includes around 4,706 beds under construction and due for completion in 2019, including South African group Redefine’s Journal site on Leicester Street, and a similar number in 2020. The total development pipeline is around 15,691 beds, according to a separate report from Colliers International – a 74% increase on current supply – following on from 5,516 beds coming to the market over the past two years.
An offshore Malaysian developer picked up a CBD fringe corner site with approval for a 13-level student accommodation tower mid-year, which will be just metres from Cedar Pacific’s 13-level facility at 123-135 Bouverie Street, to be operated by UniLodge and accommodate 648 University of Melbourne students, as well as the 648-bed $60 million facility at 108-128 Leicester Street.
Savills numbers show Brisbane is in a period of slowing activity, having peaked at 10,682 beds in 2017, while Sydney is set to decrease from 5,435 beds last year to 4,787 in 2018, while its pipeline is most accounted for some 2,250-plus beds in the application stage for 2020.
Adelaide, set to become home to the world’s largest sole-use student accommodation tower, has seen its pipeline grow by more than 800 in 2018 to 2,991. Perth has decreased from 3,621 to 3,147, and Canberra is static, with around 800 beds forecast for completion in 2019.
Australia’s capital cities are currently an attractive option compared to a wide range of major cities in the UK and Europe, with Sydney and Melbourne particularly prominent.
Savills Australia’s director of student accommodation, Conal Newland, said the popularity of both investment and development markets was defined by comparatively high rental levels and low existing supply.
“The cost of living is an important consideration in attracting international students,” he said. Major capital cities are trending towards being the most expensive locations for students to reside for living, accommodation and tuition costs.
“The value of the Australian dollar relative to the British pound and the American dollar also has the potential to strongly influence students’ choice of destination to study,” Newland said. “It will therefore be critical for Australian universities and private developers to focus on more affordable accommodation offerings moving forward.”
Newland said a rapidly increasing number of new institutional investors were looking to enter the Australian student accommodation market to take advantage of demand.
With other global cities heading towards a saturation of supply and flattening yields, Savills expects the weight of capital to increase towards 2019.
“Cooling residential markets in many major locations across Australia may also present new opportunities for student accommodation developers to secure prime sites.”
A similar scenario occurred in post-GFC London, when several new developments were delivered in the Zone 1 precinct that had previously been considered unfeasible for direct-let purpose built student accommodation.
Newland also said the overall size of new developments was “increasing significantly”, with Savills research indicating that the average size of existing properties operated by the top 10 providers was 631 beds, and the average size of pipeline properties was 893 beds.
“We have seen a period of five years dominated by a rush to the top-end quality of PBSA across Australia and now we forecast a shift towards more affordable accommodation options in the next five years.”
President of the Asia-Pacific Student Accommodation Association, Steve Tucker, said there are clear indications of a maturing market across Australia, with opportunities for investment still evident.
“Healthy PBSA competition will ensure Australia’s tertiary education sector can be accessed by more local and international students, supporting its rise in prominence globally.”
International student growth is stronger, going from enrolments in higher education courses. with student visas growing by 12.7% from 2016 to 2017. China (28.9%), India (11.0%), Brazil (4.6%), Nepal (4.4%) and Malaysia (4.1%) are the top five countries of origin for international students, while the strongest growth in international student numbers in Australia came from Nepal (56.2%), Sri Lanka (32.0%), Brazil (24.4%), Colombia (26.5%) and Spain (19.9%).
Australian Property Journal
