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Why Student Accommodation Doesn't Look Like This Any More

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Student accommodation was once a squalid affair typified by cultural icons such as Animal House, The Young Ones, and He Died With a Falafel in His Hand, but that is all changing as major institutions enter the $20 billion industry.

The transition is being driven by the ever-increasing numbers of overseas students coming to Australia to study in our burgeoning education sector, and a raft of government incentives to encourage the industry.

Total overseas enrolments are forecast to reach a record high of 660,000 this year in Australia, and institutional players such as Macquarie Bank, GIC and CCPIB are targeting student accommodation for investment.

In fact, education exports are now seen as so important that earlier this month Federal Education Minister Christopher Pyne commissioned a review of the economic benefits for industries including property.

ALSO SEE: X Marks The Spot For Student Accommodation In Brisbane

Last week, UK-based Scape Student Living arrived with a splash, snapping up two prime sites in Melbourne and Brisbane for projects with an end value of more than $560 million.

Scape, whose investors include private equity firm Telopea Capital, made its acquisition in partnership with Dutch pension fund APG.

Scape managing director Stephen Gaitanos told the Australian Financial Review that the industry was long overdue for a shake-up.

"The sector needs higher-quality managers and for a long time it has been very sleepy so I think we will see more institutional money and major entrants in the very near term," he said.

"We are not just offering a bed, blanket and bathroom, this is a fully integrated student hub."Scape’s $400 million Melbourne site is bounded by La Trobe, Little LaTrobe and Swanston Streets and will include 1500 bedrooms.

Scape's Planned Melbourne Tower[/caption]Its facilities offer a look into the future of student accommodation, with rooms aimed at both local and overseas students, including a desk, ensuite, double bed and kitchenette.

Scape London studio apartment.[/caption]Its model includes student studio rooms and teaching spaces but also rentable co-worker and incubator space for new businesses, in addition to communal areas for recreation, cafes and a gym.

Scape London foyer[/caption]The company has also acquired two sites in Brisbane’s Southbank that will be amalgamated into a $160 million student housing facility with 700 bedrooms.

The project is awaiting DA approval but is squarely in-line with the Brisbane City Council’s objective to rapidly expand the city’s supply of student accommodation.

Scape London recreation room.[/caption]In February this year, the council announced new incentives to encourage developers, in the form of a $13,440 discount for infrastructure and utilities charges for every unit built.

The council and Queensland Urban Utilities currently charge about $18,000 per unit.

The discounts will apply for new developments built within four kilometres of the city and in areas that are already zoned for medium-scale and large buildings, Brisbane Mayor Graham Quirk said.

"Now at the moment we've got a number of people out there that are interested in the construction of international student accommodation. It's not happening because there's not an economic equation to do it," he said.

"I am firmly of the view - having done the research around this - that this incentive, this announcement, will generate fresh economic activity and opportunity for our city."He said increased student numbers from interstate and overseas was putting pressure on suburban housing.

Approximately 75,000 overseas students currently study in Brisbane, and the government is targeting Woolloongabba, South Bank and possibly the CBD for development.

Under the new proposal, the development sites must be owned or operated by tertiary providers and can only be leased to current students. The properties will also need on-site managers.

Scape’s investment follows in the steps of Macquarie Capital, which last year formed a joint venture with Singapore-based GIC to invest in student accommodation group Iglu—the largest transaction of its kind at that time in the Australian student accommodation sector.

Iglu is a specialist developer, operator and manager of purpose-built, off-campus accommodation with existing four- to six-bedroom shared apartments in suburban Chatswood and the Sydney CBD, close to Central railway station.

Iglu Chatswood is the only student accommodation of its kind on Sydney’s North Shore. Iglu is also planning a 23-storey student apartment tower in Brisbane’s CBD, which will become its third facility with an expected completion date of early 2016.

Iglu Chatswood[/caption]In total, the company’s property portfolio is worth $150 million, with rent ranging from $320–$470 a week, all-inclusive.

Iglus planned Brisbane development.[/caption]GIC and Macquarie Capital plan to invest in more high-quality Iglu-managed properties. The facilities will be easily accessed from educational institutions, close to public transport and located in cities where there is a shortage of suitable student accommodation.

With players like Macquarie Capital, GIC and Scape, government encouragement, and strong underlying drivers in the form of an ever-expanding tertiary sector, student accommodation looks set to emerge as a major property sector in the coming years.

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Article originally posted at: https://theurbandeveloper.com/articles/student-accommodation-doesnt-look-like