The Purpose-Built Student Accommodation (PBSA) asset class in Australia is set to significantly sharpen its yield in the next three years, presenting a unique and attractive opportunity for investors.
That’s according to the latest report from JLL, ‘PBSA Yields: Where to from here?’, which shows the emerging PBSA sector is forecast to yield around 5.5 percent by 2020 – in line with office sector yields over the same period.
The report also reveals that PBSA yields in Australia are set to pip the industrial and retail sectors in the next three years, both of which are anticipated to yield around 6.5 percent in 2020.
In terms of performance across the country’s capital cities, Sydney and Melbourne are forecast to have the sharpest PBSA yields in 2020, estimated between 5.5 and 6.25 percent respectively, according to the report. Meanwhile, the Perth market is expected to be the weakest performer (estimated between 7 and 7.5 percent) due in part to a general preference for east coast locations.
And, comparison with the mature European market shows significant room for future growth for the sector in Australia beyond 2020: in Germany, for example, PBSA actual performance yields have achieved as low as four percent.
JLL Head of Social Infrastructure Noral Wild says that while the PBSA sector in Australia is relatively neophyte compared to established European markets, its performance in the next three years onwards is largely due to the nation’s commitment to and investment in education.
“Education remains one of the Australia’s largest export sectors, ahead of tourism, so it follows that we can expect to see future growth in the PBSA asset class for investors,” Ms Wild says.
“Despite being an emerging sector, the level of enquiry and appetite for investment in the PBSA asset class has grown year on year. From 2020 onwards, we can expect this to continue to grow due to the completion of a number of current and planned PBSA projects, stabilised occupancy rates and an overall boost in investor transaction volumes,” she says.
According to Ms Wild, there are unique and attractive benefits for investors within the PBSA sector from 2020 onwards.
“Strong occupancy rates, stable returns and proven operational success are influential factors that will attract investors in 2020, providing them with a diversified asset class in addition to the core sectors,” Ms Wild says.
Click here to read the full Purpose-Built Student Accommodation report