The supply of student accommodation is struggling to keep up with demand as an increasing number of international students enrol in Australia’s tertiary sector.
The gap in supply is driving a wave of developments worth billion of dollars in the state capitals, with Melbourne and Brisbane especially busy.
And as institutional investment pours into the emerging sector, yields are tightening significantly, with a number of headline deals still to come.
In Melbourne, the gap between the number of international students and the number of places in purpose-built student accommodation has passed 84,000, according to a JLL review.
In Brisbane – excluding Gold Coast figures – the gap is above 18,000 and in Sydney it is closing on 43,000.
While not all students will live in purpose-built digs, the shortfall is indicative.
“It just demonstrates that there is still a need for further development across these markets to continue to support the growth in international student numbers,” said JLL’s regional head of social infrastructure Noral Wild.
Among the major players Scape Student Living has a national portfolio and $1 billion of planned projects in Melbourne alone.
Brisbane-based Blue Sky Private Real Estate, which is in a joint venture with Goldman Sachs, has a national pipeline of more than 3000 beds.
In the JLL report, Ms Wild and colleague David Larkin noted how student accommodation players were taking advantage of the softening inner-city residential markets.
“We generally expect to see further sales of development sites with residential development approvals being transacted to student accommodation developer and operators.”
That has already happened in Melbourne, where Scape is acquiring a Franklin Street site from an offshore developer that already has a permit for a 62-storey apartment tower.
And while much of the action has been in development, the trade in existing student digs is also picking up.
This year British student accommodation giant GSA Group, which has ambitious expansion plans, bought a residential facility owned by Whitley College, on leafy Royal Parade in inner-city Melbourne for about $20 million.
In Sydney, Singapore’s SC Capital acquired a Kensington facility for $57 million and Frasers Property Australia is selling its student facilities at Chippendale.
Meanwhile, the massive $2 billion portfolio of Campus Living Villages is now in play.
A number of off-market deals due to be finalised early next year are expected to show how yields are tightening in the sector.
Historically, yields on purpose-built student accommodation assets have been between 7.5 per cent and 8.5 per cent.
“Based on market sentiment and current transactional activity yet to be closed out, we expect to see the yield range firm to 6.25 per cent to 7.25 per cent from 2017 onwards,” Ms Wild said.
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