Developers and investors in the student accommodation sector are breathing a sigh of relief as up to 1000 international students pour back into the country each day, according to ABS data.
In December 2021, 29,000 international students arrived in Australia, compared to 150 in December 2020.
From late November 2021 to February 2022, more than 56,000 international students arrived.
Since borders reopened to vaccinated international students in early February, 80,000 have returned to the country, taking up beds in purpose-built student accommodation in the country’s biggest cities.
In the year before the pandemic, Australia had the second-highest number of enrolled international students worldwide—underpinned by a burgeoning Asian middle class keen to study in Australia.
Despite the challenges facing the sector over the past two years, causing operational challenges with staffing and resources, a recent report by Savills called for optimism, predicting that both occupancy and returns in the sector are poised to bounce back.
“Interest in the sector is being driven by the broader global trend of re-allocation from ‘traditional’ real estate sectors to rented residential accommodation, which has been further accelerated by the pandemic,” Savills head of operational capital markets Conal Newland said.
“With the wall of core and core-plus capital targeting the sector, combined with the scarcity of high-quality investment opportunities, yields are likely to compress further as occupancy returns and net operating income normalises.
“As a consequence, we expect a number of existing and new investors moving up the risk curve into development funding as they are priced out of the market for prime, stabilised assets.”
In a case of good fortunate timing, one of the world's tallest purpose-built student accommodation towers has been completed and opened its doors in central Melbourne.
The tower, fund manager Cedar Pacific’s 52-level high-rise at 480 Elizabeth Street in the Melbourne CBD, has opened with more than 75 per cent of its rooms filled.
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, holding upwards of 36,000 beds, owned and developed by Brisbane-based 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.
Cedar Pacific chief executive Bernie Armstrong said the new tower had been highly sought after due to its contemporary living in a central location, easily accessible to RMIT University and The University of Melbourne.
“Australia’s 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,” Armstrong said.
“High-quality, well-located and premium-amenity buildings that foster communities will always be in demand from both international and local students.”
The new asset offers 900 rooms with a variety of room types from studio apartments to seven-bedroom multi-share units, most with ensuites and some with queen-sized beds.
The tower also has a “sky lounge” on the 51st-floor with an entertainment area with kitchen and dining facilities, a music room with a grand piano, and views over Docklands, Melbourne City and Port Phillip Bay.
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,” Johnsson 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.”
Next year Cedar Pacific will open one of the tallest purpose-built student accommodation buildings in the southern hemisphere at 480 Elizabeth Street in the Melbourne CBD. The 52-storey building overlooking Queen Victoria Market will offer more than 900 beds.
