Australia’s purpose-built student accommodation (PBSA) sector has been ranked as the most attractive for investors globally, as the mainland capital cities maintain a youthful skew in defiance of the country’s overall ageing demographic.
According to agent Savills’ 2019 global living report, Australian PBSA ranks as the most superior on measures such as affordability, regulations, student numbers and university rankings and fees. Canada and Austria were ranked the second and third most attractive.
By 2029, 35 per cent of Sydney’s population is expected to be aged between 15 and 39, the cohort defined as Millennial or Generation Z.
While this marks a decline from 37 per cent in 2016 – as measured by that year’s census – other western world centres are ageing much faster.
Melbourne and Brisbane are expected to maintain their youthful share at 36 per cent.
Canberra, the youngest capital is also forecast to be the most youthful with 37 per cent of 15 to 39 year olds.
In contrast, Adelaide will only have 32 per cent of its denizens in the young demographic.
“While much of the developed world ages, Australia’s most urbanised cities are forecast to remain youthful, underpinning demand for student accommodation,” the firm says.
Savills director of student accommodation Paul Savitz said the youthful trend was driven not just by the education market. “It’s also a migration story, because those coming to Australia are generally younger,” he said.
Hosting 430,000 foreign students, Australia is the third most popular destination behind only the UK (460,000 students) and the US (one million).
Mr Savitz said while the US and UK remained the most popular foreign student destinations, both countries have seen a decline in their university aged populations.
The local demographic trends help to explain the influx of institutional capital that is transforming a cottage industry into mega facilities that offer much more than a traditional dorm – but at a ritzier price as well.
“The industry is maturing and becoming much more institutionalised and experienced with differentiated product,” Mr Savitz said.
“The focus is on livability well being and experience, it’s not all about providing a bed.”
The ownership of the PBSA sector is fast consolidating, with Scape Australia recently buying rival provider Atira from owners Goldman Sachs and Blue Sky for $700 million.
Scape is also reportedly the last bidder standing for Urbanest, which is being auctioned by its US owner Washington State Investment Board with a mooted $2 billion price tag.
If the latter deal is sealed, Scape will emerge as the biggest PBSA operator with a current capacity of about 14,000 beds.
“Until early 2019, a lack of available operational assets to purchase has held the sector back from an investment, liquidity and access perspective,” Mr Savitz said.
“However with more than 24,240 student accommodation beds completed since January 2017 and a further 4170 expected to be completed by the end of 2020, we expect transaction volumes to continue tracking upwards.”
Meanwhile, agent JLL says education providers are having a “material effect” on office demand in Melbourne’s CBD. Education accounted for 29 per cent of the CBD’s net space absorption in 2018.
To date, activity has been clustered around Melbourne University and RMIT University at the northern end of the city.
But in what the firm describes as a self fulfilling cycle, international students are “aggregating” in the central CBD and this attracting the non-traditional education providers such as the rapidly expanding Redhill Education.
JLL estimates the knock-on demand for PBSA beds at 86,000 across the six capitals, a 16 per cent increase over 12 months.
The firm expects 100,000 beds will be needed by 2020.
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