Blue sky ahead for student accommodation as towers fill up

“We had an optimistic budget for this property, and its already exceeded that,” chief executive Bernie Armstrong told The Australian Financial Review.

“On-campus learning has returned and visa waivers and government support is helping to bring back overseas students.”

New ABS data shows almost 1000 international students arrived in Australia every day in January – and just more than 56,000 since late November – after the sector, which before the pandemic generated $40.3 billion in revenue, went into virtual hibernation.

Billed as the tallest purpose-built student accommodation tower in the southern hemisphere, Cedar Pacific’s new Melbourne building offers 909 beds and amenities such as a lounge and entertainment area on the top floor, a music room, art studio, gym and many study and breakout areas.

“We’re learning as we go along, trying new things,” Mr Armstrong said.

UniLodge Melbourne City, as the Elizabeth Street building is known, is part of a $2 billion portfolio of more than a dozen student accommodation towers owned and developed by Cedar Pacific in Australia and New Zealand.

All are run by UniLodge, the country’s biggest operator of student accommodation. UniLodge is majority owned by private equity firm Pamoja Capital, the backer of Cedar Pacific.

The fund manager’s pipeline of projects is funded by offshore institutional investors, having raised more than $1 billion across two specialist funds launched in 2018 and 2019. Yields in the sector average about 5 per cent.

Two more high-rise student accommodation buildings are under construction in the Melbourne CBD: a 656-bed tower overlooking Queen Victoria Market and a 715-bed tower on La Trobe Street.

All are close to campuses of the University of Melbourne, Melbourne Institute of Technology, La Trobe University and RMIT.

The Elizabeth Street tower was completed in the middle of last year, but the opening was delayed until Australia’s border reopened and to coincide with the start of first semester this year.

Australia ‘highly attractive’ to students

About four in five residents of 480 Elizabeth Street are international students. The building offers a range of studios and multi-share apartments, with weekly rates starting from $415 inclusive of utility bills and Wi-Fi.

“We believe firmly that the Australian student accommodation sector has strong long-term fundamentals, which are supported by the rapid rebound in occupancy since borders have reopened and universities have returned to on-campus learning,” Mr Armstrong said.

Australia is the third biggest international student market, behind the United States and United Kingdom.

“We were neck and neck with the UK before COVID, but the UK reclaimed the title when they opened up earlier,” Mr Armstrong said.

But, he said, the Australian market remained highly attractive to international students, given its strong economy, strong education sector and the high rankings of its universities.

“International students like the urban lifestyle offered in Australia, including the proximity to the job market,” Mr Armstrong said.

UniLodge chief executive Tomas Johnsson said the building’s official opening signalled renewed optimism amid “an extraordinary rebound” in student numbers.

“The return of our vibrant student population to our cities is an extremely positive milestone in Australia’s post-pandemic recovery,” he said.

“International students are not only fantastic future Australians with a good education and good earning capacity, they are a workforce keeping Australian businesses alive.”

The rebounding international student market is encouraging new players into the market,. Among them is global investment giant Brookfield, which has taken over a development site opposite the University of Melbourne, seeding what it hopes is a $500 million pipeline of assets.