Australia's Student Accommodation Supply Gap

As the development pipeline for purpose built student accommodation starts to ramp up in Australia, a new report by JLL shows the provision of this type of housing is still not keeping pace with the increasing numbers of students.

JLL's Australian Student Accommodation Market Update 2015 reports that Sydney, Melbourne and Brisbane all provide less than one bedroom of purpose built accommodation for every 10 students. This compares to a more estbalished market such as London, where the ratio is over two-and-a-half beds per 10 students.

Australia is the fifth most popular study destination for international students behind the USA, the UK, Germany and France.

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Supply Gap
The JLL report provides high level analysis of the potential shortfall of the existing provision of purpose built student accommodation for international students in Sydney, Melbourne and Brisbane.

JLL's Director of Student Accommodation Conal Newland said, "While the analysis doesn't include what kind of demand that exists from the international student market in each state for purpose built accommodation, it does show that there is a big gap between the existing and pipeline of supply of this type of housing.""Melbourne has the biggest gap at 69,323 beds, while Sydney is half this number at 29,361 and Brisbane comes in the lowest gap of 15,309 bedrooms.

"This gap analysis is predicted on the current pipeline of supply in all states of 20,471 bedrooms being delivered. Brisbane currently has the highest pipeline of accommodation to be delivered at 8,661 beds, Melbourne has 6,856 beds and Sydney is the lowest at 4,954 beds to be delivered over the next five years.""JLL has identified a total of 58,109 beds of purpose built student accommodation exist in the top six Australian metropolitan localities. Yet the number of students estimated to be studying in Australia is 1.3 million.

"Given the structural undersupply of good quality accommodation across many locations in Australia, further development is necessary to support Australia's appeal to international students and domestic students studying interstate and intrastate."
Current Supply
JLL estimates that the increase in supply of purpose built accommodation has been 8.7 per cent in the past 12 months or equivalent to an extra 4,647 bedrooms.

"Sydney will have supply additions this year of approximately 2,700 bedrooms. Nearly 1,000 beds have been delivered in three purpose built properties. Another 1,700 beds are due for completion for the start of the second semester."

"Brisbane has seen the biggest increase in student housing, which is being supported by the Brisbane City Council who have been both proactive in the marketing of student accommodation and also the promotion of student accommodation within the planning system.

“Our research indicates that the pipeline has grown to well over 8,000 bedrooms however we note that 75 per cent of these are still speculative without planning applications lodged.

“If completed, this new wave of development will establish the CBD and South Bank as two student accommodation destinations and is expected to consolidate student focused amenities in these areas.

“We are seeing a new wave of development across Melbourne driven both by the universities and the private sector with a number of schemes programmed for completion over the next three to four years.

“But the strength of residential markets in Sydney and Melbourne and now the emerging strength of the Brisbane residential market still remains a barrier to further development in the student accommodation sector due to the value of alternative uses such as residential.

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“Chronic undersupply is a key issue, but at the same time the delivery of appropriate and affordable accommodation being delivered in today’s buoyant property markets is a key challenge for the sector.

“However given the critical shortage of good quality accommodation we foresee the development pipeline will continue to increase and we also see opportunities for universities to work with private sector operators, particularly to help deliver affordable accommodation for students."JLL’s analysis shows that three-quarters (981,427) of the current 1.3 million international and domestic students in Australia study in New South Wales, Victoria or Queensland.

Based on the latest demographic information, total student numbers in Australia (international and domestic) have increased 4.4 per cent over a 12 month period. The largest number of international students in Australia continues to be from the Asia Pacific region, with Chinese students making up a 27 per cent share in 2014. India made up 10 per cent and had the strongest growth in international student numbers between 2013 and 2014 at 28 per cent. China, in comparison, had modest growth of student numbers are 1.8 per cent.
Market activity & new entrants:
The JLL Report says a number of global investors have entered the market in the last five years and in 2015, there have been a few new large scale entrants.

Mr Newland said, “Global investors have identified the opportunity to participate in the Australian student accommodation market and over the last 18 months we have seen institutional investors such as Macquarie Capital, GIC, Valparaiso private equity, APG and Scape are all global players that have entered the market.

“There have been two new entrants in the top 10 operators this year. Living + Learning Partners (L+LP) led by Balfour Beatty plc, who completed the University of Wollongong transaction; and Scape Student Living, an established UK student accommodation provider in a joint venture with APG Asset Management who acquired their first site in Melbourne.

“The total number of beds either owned or managed by the top 10 providers in Australia has increased 9 per cent in the last 12 months from 27,744 to 30,215 in 2015.

“Many of the major developers and operators in the market are now looking to grow portfolios.

“As the competition for international students intensifies, the cities that Australia is competing with are increasing the supply and improving the quality of accommodation offered.

“A key challenge for the Australian market is the issue of affordability and the introduction of design trends such as smaller studios and twin rooms in looking to address this."

View JLL's Australian Student Accommodation Market Update 2015 here.