Strong growth of international student numbers in Australia could be moving this accommodation sector from alternative to mainstream, CBRE reports.
In the recently published Viewpoint, Student Accommodation: Lessons to Learn, CBRE highlight the strong growth of international student numbers in Australia, which has led to a supply boom in the purpose-built student accommodation (PBSA) sector in recent years. As a result, the sector has seen an increased number of commercial PBSA operators establishing their presence in major university cities.
CBRE Research Manager Joyce Tiong said institutional investors were tapping into strong student numbers and a slowdown in the residential market, leading to a greater supply of beds.
Sustainable interest is said will reach a testing point as private equity firms look to make moves on Urbanest’s $2 billion and Atira’s $700 million recently listed portfolios.
Urbanest’s portfolio currently generates around $100 million of annual income.
“The current low yields in the traditional commercial real estate sectors, along with the residential market moving firmly into a period of correction, has increasingly led institutional investors to look at allocating capital elsewhere,” Ms Tiong said.
CBRE’s 2019 Investor Intentions Survey revealed that investor preference for student accommodation had grown 2.5 times, compared to the previous year.
Ms Tiong commented that the successful sale of Urbanest and Atira’s combined $2.7 billion portfolios was expected to garner considerable interest from domestic and international institutional investors.
“Taking into consideration the circa 17,000 beds currently under construction or with development approval, we expect the number of beds, both on and off campus, to grow from circa 65,000 to over 80,000 beds in the next five years – an increase of approximately 25%,” Ms Tiong said.
Rosie Young, Director, CBRE Hotels/Student Accommodation has indicated that despite the short-term affordability associated with a softening of the private residential market, the additional features offered by PBSA (such as pastoral care, all-inclusive rents, greater security and immediacy of access) will continue to stoke interest and provide a point of difference.
“Despite the Australian PBSA sector not being as mature or transparent as the more traditional sectors, stronger demand from major institutional investors is expected as they seek out alternative investments which will continue to support the growing PBSA sector,” Ms Young said.