- Investors are attracted by the accessibility of the university accommodation sector
- The shift could represent a broader movement away from traditional investment
- Broadly the sector is showing signs of optimism fueled by the return of overseas students
A recent report released by Savills Australia highlighted a growing investor interest in university accommodation.
The report described Purpose-Built Student Accommodation (PBSA) as “arguably the most accessible subsector for buyers looking to reallocate to operational real estate”.
Savills Australia Head of Operational Capital Markets, Conal Newland, believes the trend is a part of a larger shift in investor focus.
“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.”
Conal Newland, Savills Australia
The report indicates that investor demand for student accommodation has maintained strength despite a lack of operational stock limiting investment opportunities.
Mr Newland explained that this has pushed investors into the development opportunities instead.
“Investors have therefore sought development-led deals, either directly through acquisitions of sites, or alongside local developers in structured transactions,” he 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 to witness 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.
As easing borders across the country allow international students to return, the university accommodation sector is broadly displaying signs of optimism.
“We foresee a strong transactional market in 2022 buoyed by the confidence of occupancy levels improving and gradual re-stabilisation of revenue flows,” said Newland.