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A supply shortage is making it more expensive for students to find somewhere to live.Credit: iStockphoto
Rutman said he has more than a dozen property investor groups on his books seeking student accommodation development sites close to university precincts around Melbourne, including Melbourne University, Australian Catholic University, RMIT and outside the CBD at the LaTrobe, Victoria, Monash and Swinburne University campuses.
He said a JLL-listed site earmarked for students at 41-45 MacKenzie Street, in the Melbourne CBD, would be a good test for the sector. “It has already generated strong interest, and could pave the way for more ageing city office buildings to be repurposed for student use,” he said.
The trend is good news for office owners. The office market is suffering a major slump, with many lower-graded buildings near empty after tenants’ flight to quality to more modern, energy-efficient buildings, together with the rapid growth of the work-from-home phenomenon.
The owners are looking for a solution to dwindling rents and declining office valuations, with many likely to be eager to sell into the booming student accommodation sector.
JLL alternative investments associate director Tommy Christian said investors are eager to add living sector exposure to their property portfolios.
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“Returns in the student accommodation sector are healthy compared with other property sectors on the back of strong market fundamentals, with minimal supply, and record low vacancy across residential markets,” he said.
In an Accommodating the Growth in New Students report, CBRE highlights that 8000 purpose-built student accommodation rooms will be delivered across Australia from 2023 to 2026 – a 7 per cent uplift. However, that number is way short of what is required.
“The number of beds in the pipeline is 30 per cent below annual historical supply figures,” Christian said. “With a heavily subdued development pipeline, we expect further rental growth in the short-to-medium term.”
The potential for strong investment returns has attracted major institutional capital.
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Of the larger-scale developers, Scape launched in Australia in 2013 and has grown to become the country’s largest owner-operator of student accommodation, with 16,000 beds in 33 buildings across four key educational precincts. It has a further 12 buildings in planning and development, which will bring its portfolio to 22,000 beds by 2024.
The $1.7 billion Queen Victoria Market precinct, near Melbourne’s RMIT, is part of the urban renewal project undertaken by the City of Melbourne. Lendlease will act as developer and a construction partner for the project with Scape, to deliver 1100 student accommodation beds across two towers. Scape also has a 300 bed development underway in Leicester Street, Carlton.
In Sydney, new supply announcements include the University of NSW’s partnership with Iglu to develop 1066 apartments across five buildings opposite UNSW’s Kensington campus, and Wee Hur’s plans for 411 beds to service the University of Sydney and University of Technology Sydney.
Iglu has 5400 purpose-built student accommodation beds and has 1500 more in its development pipeline, while Wee Hur has 4000 beds and plans to roll out 1900 more.
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