Scape strikes $1bn venture as student sector fires up

Supplied Editorial The Scape development (l) on the southern site of the Queen Victoria Market precinct

Scape’s planned development, left, on the southern site of the Queen Victoria Market precinct in Melbourne.

The country’s largest student accommodation company, Scape Australia, has struck a fresh $1bn partnership with Dutch pension investor APG Asset Management and Canada’s Ivanhoé Cambridge to develop purpose-built-student accommodation assets in Australia’s thriving student housing sector.

The move comes amid continued stress in the rental market and the failure of the $26bn international education industry to provide accommodation, pushing at least 400,000 inter­national students into the private rental market.

Scape executive chairman Craig Carracher has lofty hopes for the sector in addressing housing shortages, but said that it faced regulatory challenges, with rules favouring build-to-rent providers.

“There is more purpose-built student accommodation now than there ever has been,” he said, with forecasts showing that the growth in the number of purpose-built student accommodation beds was matching the rise in the student population.

“There would be more purpose-built student accommodation beds in the biggest, most problematic markets … if there was some sort of planning recognition of the sector,” he said.

The company believes that only large-scale players will be able to deliver the quality accommodation that students and renters expect, and also be able to reap the benefits of economies of scale.

“Our ambition is to democratise the rental market for students and other renters alike by leveraging our operational scale and delivering inspired intelligent design experiences at value. As the leading local operator in the residential for rent sector, we have a clear and scalable value proposition for purpose built student accommodation and rental housing in Australia,” Mr Carracher said.

Craig Carracher

Scape executive chair Craig Carracher. Picture: Jane Dempster

Rental conditions improved slightly in March, yet vacancy rates remain close to historic lows, according to researcher PropTrack, which found the national rental vacancy rate bumped up 0.04 percentage points to sit at 1.11 per cent in March, well below pre-pandemic levels.

The new venture by Scape is its third in a series of development vehicles, backed by a variety of global investors, and the first in the wake of the Covid-19 crisis that ripped through the sector before it bounced back amid a tide of international students.

Scape is focused on developing sites near Australia’s world-class universities and also uses specialist design and managers to look after students. It has built up to 17,200 operational apartments and it already runs the country’s largest privately owned residential-for-rent portfolio.

The new venture is being seeded with the development of about 1000 student apartments at Queen Victoria Market in Melbourne They are being undertaken in partnership with Lendlease, which is building two other buildings, with units and offices.

Scape said the strong recovery in international and domestic students and a shortage of student accommodation in Australia had resulted in low vacancy levels and strong rental growth.

It says developing more purpose-built student accommodation will release pressure from the hot rental housing market, by providing a safe and purpose-built living solution for students.

Despite recent crackdowns on student visas, Scape said the strong urban student population growth over the past ten years is set to continue over the next decade.

This, along with a structural undersupply of rental housing, strong rental demand and affordability constraints, is also expected to drive deals for the venture as it hunts out new inner city sites.

Scape manages about 36 assets and has another 10 purpose-built student housing and urban living assets under development. It has acquired 22 major development sites since 2015 and built up an unmatched scale locally.

APG head of Asia Pacific Real Estate, Graeme Torre, said the strategy to develop and operate student properties in key gateway cities in Australia was in line with the urbanisation mega-trend.

“The PBSA sector is often considered the entry level for young renters in the residential sector and as a consequence helps address important issue such as housing affordability and availability,” he said.

Ivanhoe Cambridge head of Asia Pacific, George Agethen, said the move allowed it to participate in the “institutionalisation of the living sector in APAC and support the provision of well-managed, high-quality housing for students”.