Major investors giddy over student accommodation

A five-bedroom apartment in Student One’s Wharf Street tower in Brisbane’s CBD.

Capital city growth in purpose-built student accommodation is unlikely to slow down soon as large institutional investors jump on board, attracted by solid potential returns. 

Speaking at the Property Funds Association conference in Adelaide this week, Scape chief financial officer Tim Peel says purpose-built student accommodation has become accepted as a mainstream investment category supported by big institutional investors.

As the third-biggest market for international students behind the US and Britain, Australia is now attracting more investor interest, Peel says.

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“They’ve realised Australia is the next stop for institutionalisation of the sector and over the last couple of years we’ve seen a number of new entrants come into the market,” Peel says.

“We’re now at a phase where there’s a lot of development going on in the student accommodation space but it’s against a backdrop of very short supply relative to student numbers.”

Last week Scape won $250 million in investment from Allianz Real Estate to help develop projects across the major capital cities.

And last Monday The Australian reported fund manager Cedar Pacific was looking to raise up to $600 million to invest in new student accommodation projects.

Peel says supply issues are most pronounced in Melbourne and Sydney, where penetration rates are sitting at about 11% — or one bed for every 10 students.

“The most popular destination for overseas student accommodation is in Melbourne where you’ve got two great universities right on the doorstep of the CBD,” says Peel.

“It’s difficult for the universities to provide enough accommodation but they’re obviously very motivated to grow their foreign student numbers.”

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