[+] Local Residential Plots Student Living Play as Sector Evolves

Macquarie-backed build-to-rent provider Local Residential is exploring a move into the student accommodation sector. The move is part of a strategy to take the fledgling residential developer from 1300 units currently under construction to a pipeline of up to 10,000 by 2030. Former Grocon transactions manager Matthew Berg, who with Grocon’s then head of development Dan McLennan set up Macquarie’s push into build-to-rent just three years ago, says their long-term plans have always been to get into what he calls “the living space”. In a wide-ranging interview, Berg tells The Urban Developer that strategy would begin with a move into affordable housing later this year, followed by a push into student accommodation. “We’ve begun capital raising for an affordable housing fund,” he says. “Our plans are progressing well.” Berg says funding discussions are at the “term-sheet phase” with at least one domestic superannuation fund. Other groups are “in our data room at the moment on that particular fund”. Local has exclusivity deals on three properties ear-marked for development—two inner-ring sites in Melbourne and a single middle-ring address in Sydney. The location of the properties, the identity of investors and specific details of the fund are all protected under confidentiality agreements. ▲ Local’s South Melbourne build-to-rent project (left) and another at Box Hill. Both are expected to be completed at the end of this year. “What the foreign investors are really telling us is that once they choose an accommodation manager in Australia, it’s then not really efficient for a big pension fund or sovereign wealth fund to spread that investment into a number of managers,” Berg says. “They’re more likely going to choose to build around an operator that can also do PBSA, or if they go into affordable housing they’ll do it with someone they already know through build-to-rent.” He says the idea of student accommodation had been raised with Local’s current investment pool during an annual business update. It has been well received. He sees affordable housing as a natural merging point between build-to-rent and purpose-built student accommodation. “In Australia, PBSA is actually quite a limited playing field,” he says, “and there’s obviously been a lot of consolidation in that space over the past three or four years.” In 2019, the country’s biggest student accommodation provider, Scape, went on a buying spree, first snapping up a portfolio of three sites at the University of New South Wales at Kensington, before acquiring the 3500-plus bed Atira portfolio just four months later. Two years later Scape acquired a three-building, 428-bed portfolio from the University of Technology Sydney for a reported $95 million. ▲ Local’s Matt Berg, Colliers’ Jade Grantham and the PCA’s Torie Brown. The Property Council of Australia executive director for student accommodation Torie Brown says the Australian market is still at the beginning of its story, with room for new players. “There’s definitely flex within the market for growth,” Brown says. “PBSA in Australia has only existed really for about 15 years—we’ve seen it have a much longer life cycle in the UK, Canada and America where there are far more players. “So, it’s certainly still in its growth phase.” Jade Grantham is a capital markets executive at Colliers, with a focus on build-to-rent, co-living and student accommodation. She recently transferred from the company’s London office to Melbourne. “I think from an operational perspective, a lot of the operators, developers or investors that go into build-to-rent … once they get their heads around it, there are a lot of similarities in how the building is run,” she says. “Obviously, the target demographic is slightly different, but in general, it’s a purpose-built rental product across the board, and that includes co-living as well. “A lot of capital you’re seeing in the UK and the US that has a build-to-rent or student accommodation product is now having wider living requirements that can go across all three of those asset types.” Australia’s top 10 markets for foreign students ▲ Source: PCA Australia’s student accommodation providers own and manage more than 76,500 beds across the country and, in a report released in April, the PCA’s Student Accommodation Council said another 7770 beds are projected to come online by 2026. But that’s not nearly enough to alleviate demand in the private rental market. In fact, The PCA’s Brown says Melbourne—the unofficial national PBSA capital—has about 27,000 student beds, which is still a ratio of one bed for every 17 students. Sydney has about 17,000 beds. It then came as something of a surprise to the sector when Federal Treasurer Jim Chalmers, last month in his third Budget speech announced a cap on foreign students , saying the number of international students that universities can enrol will be tied to their ability to build suitable accommodation. “If universities want to take more international students, they must build more student accommodation,” the treasurer said. “We will limit how many international students can be enrolled by each university based on a formula, including how much housing they build.” Colliers residential capital markets national director Robert Papaleo says there is still not enough detail regarding the announcement, but warns investors are “likely to read that statement with caution” until there’s further clarity. ▲ UniLodge’s South Bank PBSA in Brisbane. “The student accommodation sector has been led by international investors, big overseas pension funds or insurance companies,” he says. “I can’t think of any large domestic super funds that are in the PBSA space behind any of the big brands.” Despite this, Papaleo says, there have been historically higher investment returns for PBSA than build-to-rent. “That is a function of the ability to generate significant rental volume or value out of the same amount of space,” he says. He’s talking about the building’s physical form. Student accommodation may include studio apartments of just 15 or 16 square metres. Build-to-rent tenants demand much bigger spaces. And student accommodation leases are often renewed every 12 months. In fact, speaking at The Urban Developer’s roundtable in Melbourne in April, MaxCap commercial real estate investment manager Simon Hulett said the student accommodation sector remained a strong hedge against the country’s stubbornly persistent inflation. Papaleo argues Australia’s housing and rental crisis means student accommodation can no longer be simply about servicing international students. ▲ The PCA says increasingly Australia’s domestic students are moving interstate to study. “There is, I think, an increasing need for domestic students to also have to live in PBSA,” he says. Brown agrees. She says while figures show about 27 per cent of PBSA tenants are Chinese students, another 26 per cent are Australian. And they are not just regional kids moving to the cities for the first time. “We have seen, for the first time, a big change in student movement,” Brown says. “We’re now finding domestic students are more likely to move interstate to study whereas previously Australia has had a culture of studying in the city in which you live.” All of which is giving Local plenty of food for thought. “I think we will look to differentiate ourselves by targeting a cohort that is not only international students,” Berg says. “We’ll be looking at trying to lower the price point, like we have with our build-to-rent product compared to some of the other groups out there. ▲ Scape’s Toowong student accommodation. In 2019 Australia’s biggest provider went on a buying spree. “And I think we’d look at de-risking the actual product itself as well, in terms of ensuring that it’s capable of being rented to non-students.” Colliers’ Grantham says those are the kinds of changes happening quickly in the Australian market. The focus on prime inner city sites with lots of amentity, she says, is changing rapidly. “And actually, that need for suburban, affordable mid-market product with a simple level of amenity, but the community aspect, the convenience with the retail, and I think given the land opportunity within Australia, those changes will be much bigger,” she says. “And that kind of follows the US model.” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

[+] Local Residential Plots Student Living Play as Sector Evolves

Get the full story.

Early Plays Pay Off in Sydney’s Eastern Reform Shake-Up

Comiskey Warns Time’s Almost Up to Beat Games Construction Crunch

Why Latent Defects Insurance is Moving from Niche to Mainstream

Fun Under Management: The Rise of Destination Office Christmas Parties

Willow Secures Rare Toorak Consolidation After Three-Year Pursuit

A fireside chat with Troy Daffy | Managing Director, Silverstone Developments

Brisbane Long Lunch | Panel discussion with Rob Comiskey, Frank Licastro, Steve Laffey & Alexandra Stuart-Robertson

Sydney Long Lunch | Panel discussion with Jamie Durie, Jennifer Macquarie & Michael Romano

The AI-Driven Developer

Graya Plots Three-Storey Bump for Hamilton Scheme

Port Kembla Rezoning Clears Way for 200ha Business Park

RBA Reveals $400m Second Stage of Sydney Asbestos Fix

First Look: WA’s First Vertical Primary School Revealed

2026 Developer Outlook Lunch | Melbourne

2026 Developer Outlook Lunch | Brisbane

2026 Developer Outlook Lunch | Sydney