Australia’s rising appeal with foreign students is underpinning a wave of growth in the education sector, with office markets around the country experiencing unprecedented levels of demand from providers looking to accommodate swelling operations.
A new CBRE Viewpoint shows Melbourne is witnessing the strongest trend, with close to 36,000sqm in education lease deals closed last year – a 44% increase from 2013.
CBRE Research Analyst Anne Flaherty said the strong demand from education providers in Melbourne was unlikely to waver, with continued momentum expected in the sector over the next few years.
“Education and training is currently Victoria’s largest export industry and shows no signs of slowing down,” Ms Flaherty said.
Over the past 18 months, the number of leases signed to education providers in the Melbourne CBD has more than doubled from 5% (20,000sqm) to around 10% (45,000sqm).
The report shows growth in the education space has been pivotal to the absorption of secondary space in Melbourne’s office market.
In 2014, vacancy in the secondary market reached its highest level in a decade, forcing landlords to increase incentives in a bid to entice tenants. This is reflected in annual absorption figures, which totalled only 15,000sqm for secondary space, compared with 52,000sqm for prime.
“In contrast to many industries, tenants in the education sector are most likely to lease secondary grade space and are therefore, playing an important role in the absorption of this space,” Ms Flaherty explained.
Over the past 18 months, 80% (35,500sqm) of space leased by education tenants was secondary grade space.
CBRE Research shows Australia is the third most popular international study destination, with Melbourne ranked Australia’s second most sought after study hub behind Sydney.
Despite this however, Melbourne has the highest proportion of international students, at more than 30%, Ms Flaherty explained.
“Part of Melbourne’s appeal when compared with Sydney is the lower cost of living,” she said.
Ms Flaherty went on to say the education sector was emerging as one of the strongest growth pockets of the economy, accounting for more than 16,000 new jobs in Victoria alone over the past five years.
“University enrolments are rising on average 4% per year, with domestic university enrolments exceeding one million for the first time in 2014 and the number of international students commencing study was up 10% over the previous year,” Ms Flaherty said.
Ms Flaherty said there were a number of economic and legislative factors contributing to growth in the education sector.
“For international students looking to study abroad, the decline in the AUD has made Australia a more affordable option. Additionally, Victoria has two of Australia’s ‘Group of 8’ universities, the University of Melbourne and Monash, which are ranked in the top 100 globally,” Ms Flaherty explained.