This article is from the Australian Property Journal archive
DESPITE the recent entry of heavyweight institutional investors into Australia’s student accommodation market, a continuing increase in international students and sustained population growth will see demand outpace supply, according to Savills.
Savills report found international student numbers are growing at double-digit rates, with Australia now the number three destination for the four million mobile students worldwide.
Currently, China and India together supply nearly 40% of international students and in 2015 grew at more than 13% and 15% respectively. This increase in international students, coupled with a sustained population growth, will see demand for PBSA significantly outpace supply, although more than $2 billion of capital has been earmarked for student accommodation development projects across Australia since the beginning of 2015.
“Investors are moving beyond the traditional core markets and seeking alternative asset classes such as the student accommodation where the fundamentals are strong.
“The critical undersupply of appropriate Purpose Built Student Accommodation (PBSA) in many capital cities, high occupancy levels for stabilised operational properties, robust revenue growth and attractive yield pricing in comparison to the globally established student accommodation markets, all contribute to student accommodation being an attractive investment,” the report said.
Several new institutional investors have entered Australia’s student accommodation market since the start of last year, including Blue Sky Private Real Estate, Cedar Pacific, Global Student Accommodation, Scape, Valparaiso and Wee Hur, with Savills suggestion there will be “at least one more new significant developer/operator” entering the market this year.
Global Student Accommodation’s entrance has come with the aim of a portfolio of 25,000 beds, whilst Blue Sky’s joint venture with Goldman Sachs has seen a strategy implemented to create a $1 billion portfolio comprising 10,000 beds. The joint venture has purchased The PAD, which currently manage accommodation for nearly 2,000 students, with new developments underway in Melbourne, Brisbane and Adelaide.
“The top 10 providers currently own a total of 15,498 beds and have a combined development pipeline of 14,205 which equates to circa 92% of the existing supply – indicative of the strong focus on development during 2015.”
“The average size of the top 10 providers owned operational properties is 337 beds and the average size of development properties in the pipeline is 530 beds,” the report said.
UniLodge leads the top 10 in terms of operational beds and beds in the development pipeline, followed by CLV, Urbanest, Student Housing Australia and new entrant into the market Blue Sky with Goldman Sachs. The Pad, Scape, Valparaiso/Student One, Iglu, and Living + Learning partners round out the top 10.
The largest development pipelines are in Melbourne, at 9,651 beds or 4% of full-time students, and Brisbane with 8,930 beds at 6% of full-time students.
“Sydney has a limited pipeline in place over the next four years with a total pipeline of 3,665 beds (2% of full-time students), of which circa 38% is proposed by universities. The strong residential land market continues to be a significant barrier to entry,”
Savills said the Brisbane development pipeline will peak at around 9,000 beds, whilst continued new development activity in Melbourne will see the pipeline increasing towards 12,000 beds.
“Alternative use values will remain a barrier to entry, with Sydney continuing to be the most difficult city for student accommodation developers to access,”
A number of universities have commences on-campus procurement projects including the University of Melbourne, La Trobe University, James Book University, Queensland University of Technology, the University of Western Sydney, Australian National University, the University of South Australia and Curtin University.
There are around 67,695 beds of PBSA in the eight Australian capital cities, with all cities having an existing supply of less than 12% per full-time student with the exception of Canberra (27.8%).
Savills said research indicated there were two transactions of operational residences totally approximately $90 million in 2015, including CLV’s offloading of Kelvin Grove Village in Queensland on a forecast net initial yield of 7.25% for 2016, and 88 Hindley St Pty Ltd’s sale of UniLodge @ Metro in Adelaide on an 8% yield.
Australian Property Journal
