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December 9, 2016

With student numbers growing and a solid development pipeline in place, the outlook for Australia’s Purpose Built Student Accommodation (PBSA) sector is positive.

The latest Australian Student Accommodation Market Review report from JLL shows overseas student numbers in the country have grown on the back of a fall in the value of the Australian dollar.
“Education is now Australia’s second-biggest export industry, behind mining, with Australia attracting more international students than Britain,” says Noral Wild – JLL’s Head of Social Infrastructure, Australia.

“A key factor driving the growth in overseas student enrolments in recent years has been a dramatic easing in the cost of living, and the softening of Australia’s currency over the past two years has certainly helped make Australia a more attractive place to study.”

“This improved competitiveness has resulted in a substantial increase in the number of foreign students within Australia after several years of stagnant growth.”
While overseas student numbers are at record levels, their share of total enrolments is largely unchanged over the past four years, suggesting there is opportunity for the sector to expand further.
Victoria is the most popular destination for overseas students, accounting for 36 percent of enrolments,
NSW follows at 28 percent and Queensland has 14 percent.

There are 64,150 beds in Australia’s top six metropolitan locales, and 6000 beds have been added in the past year alone. Brisbane and Melbourne have the most active pipelines and collectively account for around 58 percent of total beds in the market. Rents remain strong in Melbourne, Sydney and Brisbane.

Market-by-market, JLL’s outlook for the PBSA sector is positive:

  • Sydney: Total stock for the city is 17,662 beds, with 51 percent located in the CBD or CBD fringe. Although currently undersupplied, Sydney’s development pipeline – around 2150 beds – is more modest than other Australian capitals, as competition for sites is strong. Rents are unlikely to be affected by the addition of new supply, although there is the potential for growth in the medium term.
  • Melbourne: Melbourne supply has increased significantly in the past 12 months, and Melbourne’s PBSA market now exceeds Sydney’s in total size. Melbourne is expected to remain active in the medium term, with a pipeline of 7900 beds expected to be completed over the next four years, concentrated on the CBD fringe. Given the current shortfall in accommodation, this new supply will be readily accepted by the market.
  • Brisbane: Local government support has boosted the pipeline for Brisbane’s PBSA sector, with approximately 10,000 beds proposed, although not all have approvals and some will be staged. The softening of Brisbane’s residential sector has opened the market up for conversions of residential buildings.
  • Adelaide: While historically Adelaide has not had a strong PBSA market, two major projects are examples of its maturation. Urbanest is currently developing its second project in the city, a 689-bed building on North Terrace, while Blue Sky has approval for a 542-bed facility on Waymouth St. At least two development sites are also currently being marketed as suitable for the student accommodation market.
  • Perth: Although Australia’s third-largest full-time student market, Perth is still relatively immature compared to other capitals, remaining dominated by university-operated accommodation. Approximately 4900 beds cater to 79,000 full-time students in the city, a low penetration rate which suggests the greatest opportunity for market expansion in Australia’s PBSA sector.
  • Canberra: The city’s PBSA market has been very active in 2016, with ANU continuing to expand its bed supply and recently announcing the redevelopment of Bruce Hall with more than 800 students scheduled to move there in 2019. This project is in addition to a 500-bed development currently under construction.

Looking to 2017, JLL expects the Australian PBSA market to continue experiencing yield compression as off-market opportunities settle in the year’s first quarter.

Continued on-campus opportunities will be driven by capital-city universities seeking to partner with the private sector, but regional PBSA activity will become a greater focus for operators as they seek ways to deploy capital flow and grow their pipelines.

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Noral Wild

JLL's Head of Social Infrastructure in Australia

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