2021 has been an extremely challenging year for student accommodation operators due to the Covid pandemic keeping international students out of the country and lockdowns causing operational challenges with staffing and resources.
Once a thriving $40 billion dollar industry, supporting 240,000 jobs, the sector contracted, in 2021, to an estimated $23 billion in. Despite this, there is optimism throughout the sector looking forward to Semester 1 2022, with international students being welcomed back into the country from mid- December.
“This significant reduction in revenue has impacted on government budgets and provided the impetus, alongside world leading vaccination rates, for the large-scale reopening of the Australian border to returning international students and beyond,” said Paul Savitz, Director, Operational Capital Markets at Savills Australia.
According to data from the recent Australian Student Accommodation 2021 report by Savills Australia, “Operators and aggregators have reported a significant increase in the level of enquiry since the border relaxation was announced and booking rates have been strong with some operators reporting 50% booking rates in early December.”
According analysis by Savitz, “the residential rental markets in several capital cities have bounced back from a period of softness in 2020 with decreasing vacancy rates and increasing rental levels. Lower supply levels due to owner occupiers buying apartments and limited completions of new apartments has led to constraints in the market.
“This trend will continue into 2022 and will be exacerbated by increasing levels of demand from students and non-students for rental accommodation once the international border opens.
“As rental markets continue to tighten, and become more expensive overall than pre-covid, alongside the historic undersupply of student accommodation, Savills expects the prompt recovery of PBSA occupancy and rents” he continued.
The report highlights how investors’ focus on student accommodation has been growing over the past year.
“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” said Conal Newland, Head of Operational Capital Markets at Savills Australia
“Investment demand for Australian student accommodation has remained strong, with a lack of available operational stock holding back transactional volumes. 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 NOI 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.
“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.
See Report
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