With fears of a potential oversaturation of residential units on the Australian market, student accommodation centring on university precincts, still appears to be performing strongly.
According to the latest Savills World Student Housing Spotlight, investment into the global, purpose-built student accommodation market has seen rapid expansion, with the US investing $14.9 billion globally in 2015.
Savills Student Accommodation Director Conal Newland said “student housing has proven itself to be a resilient asset class.
“With its counter-cyclical fundamentals many institutional investors are turning to the sector where they can achieve strong occupancy and rental growth.”
As an emerging market for student accommodation, transactional activity is limited in Australia as assets are generally tightly held.
Research indicates that there is more than AU$2 billion of capital earmarked for development projects in Australian student accommodation.
In a 2015 report into the higher education accommodation market Jones Lang LaSalle (JLL) estimated that the existing Australian tertiary student accommodation supply gap for Sydney was 29,000 beds, Melbourne 69,000 and Brisbane 15,000 (Australian Student Accommodation Market Update JLL 2015).
In other words, across the eastern seaboard, where there is the highest concentration of Australian Universities, there is a shortfall of approximately 115,000 beds for higher education students.
Knight Frank’s September 2016 Australian Student Accommodation Insight notes that full time university student enrollments have enjoyed a 15th consecutive year of growth and international student enrollments have reached a new high. There are one million students.
Although, 2016 supply levels remain relatively low (5,611 delivered in 2015), the changing fortunes of Australia’s diverse economy is beginning to provide an opportunity to investors and developers of student accommodation. The slowdown in mining related industries has amplified office vacancy rates across both the Brisbane and Perth CBDs. In response, the pipeline of office-to-student accommodation conversions is increasing, highlighted by Cromwell’s (Redefine Properties) most recent application for the conversion of two office towers on Charlotte and Mary Streets in the Brisbane CBD for 954 beds.
Interestingly, not all the development is one way. Last week the Queensland Government announced that it would be turning the old Queensland University Technology (QUT) Carseldine campus into a new village with 900 residences that will become home to 3500 on Brisbane’s north side.