market report - Savills

1 Australian Student report2 017 Savills market report Australian Student Accommodation*Front cover image: The University of Sydney Queen Mary Building, SydneyContents02 Introduction04 Student Enrolment Statistics08 market Focus Sydney12 market Focus Melbourne16 market Focus Brisbane20 market Focus Adelaide24 market Focus Perth28 Where students Live30 Development Pipeline32 Transactions37 Yields39 Australian Student Accommodation Top Private Providers402018 Outlook1 Savills market report Australian Student AccommodationIntroductionWe are pleased to present the 2017 Savills Australian Student Accommodation market Update. This paper provides an overview of the key drivers and market activity in this emerging asset class over the last 12 months. Key Capital Cities There are 71,645 beds of Purpose Built Student Accommodation (PBSA) in the eight Australian capital cities. The existing supply in each city is less than 11% of the full-time student population with the exception of Canberra (28%).

2 Over the first three quarters of 2017, consistent with market activity throughout 2016, the key focus for the major developers in this sector has been the continued acquisition of sites and the construction and delivery of new PBSA. Sydney is the most attractive market in terms of the supply and demand fundamentals combined with the robustness of the underlying property and investment markets. However, it remains the most difficult Australian market to access. Sydney has a total development pipeline of 5,435 beds ( full-time students ) expected to be delivered over the next four years, of which circa 30% is proposed by has the largest development pipeline of 16,294 beds ( full-time students ), which is quite a significant increase compared to 12 months ago. However, the Melbourne market is underpinned by a strong demand for accommodation, with a significant amount coming from Melbourne s Universities.

3 The Universities are also active in developing their own accommodation, and activity from the Universities is at a relatively high level (27% of the proposed pipeline). The pipeline of new PBSA projects in Brisbane has slowed somewhat in the last 12 months, following an extremely busy period over the 18 months prior, backed by the positive initiatives of Brisbane City Council. Brisbane s development pipeline is currently 10,682 beds ( of full-time students ). There are some concerns regarding the potential uptake of new PBSA being delivered into the market in the short to medium term as there is also an increasing pipeline of residential apartments being delivered in the city in the same number of new PBSA projects have entered the development pipeline in Adelaide. Perth is also a market that has witnessed a new wave of development, with a number of direct-let projects being promoted in the last 12 s eight capital cities have an existing supply of PBSA of less than 11% (except Canberra)Key focus for the major developers has been the continued acquisition of sites and delivery of new PBSA.

4 Universities have also been active in expanding their PBSA provisionInternational student growth continuing, with an increase of 11% from 2015 to 20162 Student Demographics The underlying dynamics of the Australian Higher Education market is continuing to support increasing development into new PBSA. As outlined in this paper, the international student population is continuing to increase in both universities and other education sectors. Australia is now firmly entrenched as the third most popular destination for international students studying abroad globally. However, Australia does have a very strong reliance on international students from a number of South East Asian countries. The latest demographic information available indicates that international student growth is stronger as evidenced by enrolments in Higher Education courses with student visas growing by 11% from 2015 to 2016. China (28%), India (11%), Republic of Korea (4%), Thailand (4%) and Vietnam (4%) are the top five countries of origin for international students studying in 2016, the strongest growth in international student numbers in Australia came from Brazil (20%), Malaysia (18%), Nepal (16%), China ( ), Hong Kong (10%) and Colombia (22%).

5 market Activity Australia s universities continue to be significant participants within the market . In Sydney, the University of Sydney, UNSW and Macquarie University are currently active in improving/extending existing residential portfolios. The University of Melbourne has been active with a number of projects in the last 12 months, as have Deakin and Monash Universities. In Brisbane, the University of Queensland and QUT have also considered new were only two institutional off-campus transactions in Australia in the first three quarters of 2017, however this overall activity is generally consistent with transaction volumes over the last five years. The limited number of transactions is in stark contrast to the more mature markets in the United States and the United Kingdom, both of which have been at near record of Tasmania Hobart Apartments, HobartIn SummaryThis 2017 paper focuses on the development activity occurring across Australia s main capital cities.

6 We provide insight into the projected timing for delivery of this accommodation, together with research and analysis into the accommodation mixes that are being delivered. 2018 and 2019 will be critical years in terms of the delivery of PBSA, market participants and observers will have a strong focus on the uptake and stabilisation of occupancy and revenues for new accommodation. There continues to be a number of opportunities for new entrants into the student accommodation market , including the provision of independent third party management, together with delivery of affordable PBSA offerings in many of the major metropolitan market report Australian Student AccommodationStudent Enrolment StatisticsAustralia s student population is continuing to grow at a steady rate. The latest data available indicates that total student enrolments grew by from 2014 to 2015, an increase of 36,903 students .

7 international student numbers increased by just less than in 2015. All of this growth is attributed to full-time international students which increased by almost Part-time international student numbers fell by in 2015. Table 1 details the breakdown between the domestic and international student cohorts. New South Wales, Victoria and Queensland have the greatest number of student enrolments with Victoria achieving the largest increase in enrolment numbers year on year, with an increase of compared to 2014. Of all the states, Tasmania saw the largest increase of growth in 2015 with multi-state higher education providers increasing by as detailed in Table ModeFull-time StudentEnrolmentsPart-time Student EnrolmentsTotal Student EnrolmentsDomestic691,669355,0131,046,68 2 International308,7045 4,747363,451 Tot al1,000,373409,7601,410,133% Change from : Australian Government Department of Education and Training (uCube) which is based on the student and staff data collections (2015).

8 Table 1: Total Student Enrolment Numbers in Australia, 2015 Table 2: Student Enrolment Numbers by State and Territory, 2015 Student Type / StateNew South WalesVictoriaQLDW estern AustraliaSouth AustraliaTasmaniaNorthern Ter r itor yACTM ulti-StateTot a lDomestic330,419250,857191,000103,82473, 53026, 8749,49129,24731,4401,046,682 International100,039130,13351,81436,6282 3 ,13 95,3952,44710,4133,443363,451 Total430,458380,990242,814140,45296,6693 2,26911, 9 3 839,66034,8831,410,133% Change from : Australian Government Department of Education and Training (uCube) which is based on the student and staff data collections (2015).4 There were 712,884 enrolments generated by 554,179 international students studying on a student visa in Australia in 2016. This represents an increase over 2015 figures (498,155 student visas). The top five nationalities are China, India, Republic of Korea, Thailand and number of international students enrolled in Higher Education courses and utilising study visas in Australia has grown by from 2015 to 2016, a marginally higher increase than the year previous.

9 Table 3: international Student Enrolments in Australia, 2016 Education Sector2016 Student Numbers2015 Student NumbersGrowth from 2015 to 2016 Higher Education306,691271, 7, 8 01168, ,32520, ,110144, ,95737, 47 917. 3%Total 712,884642, : Australian Government Department of Education Research End of Year Summary of international Student Enrolment Data Australia 2016 , 12 December 4: international Student Enrolments in Australia in 2016 Top 10 NationalitiesNumber of students 2016 ProportionChina196,3152 7. 5%India78,42411. 0%Republic of Korea30, , , , , , , Kong17, 5 8 Nationalities229, al 712,884* international student numbers relate only to international students in Australia on a student visa and are derived from AEI enrolments : Australian Government Department of Education Research End of Year Summary of international Student Enrolment Data Australia 2016 , 12 December 2016; Australian Government Department of Education and Training international Student Enrolment Data 2016, Extracted: January is the largest international student country of origin which contributed of the total number of international students in Australia in 2016.

10 The country with the highest percentage of growth is Colombia with growth rate of from 2015 to market report Australian Student AccommodationTable 5: international Student Enrolments in Australia Growth between 2015 and 2016 Current PositionTop 10 NationalitiesNumber of students 2015 Number of students 2016 Growth 2015-2016 Position 20151 China169,687196, ,99278, of Korea28,61030, 7,76 530, ,36229, ,61029, ,11528, ,67822, ,26419, Kong15,94117, 5 8 Nationalities211, 9 25229, al 642,949712, * international student numbers relate only to international students in Australia on a student visa and are derived from AEI enrolments : Australian Government Department of Education Research End of Year Summary of international Student Enrolment Data Australia 2016 , 12 December 2016; Australian Government Department of Education and Training international Student Enrolment Data 2016, Extracted: January Note that students can enrol for more than one course in the same year, for example an English Language Intensive Course for Overseas students (ELICOS) and then a higher education : Australian Government Department of Education Research End of Year Summary of international Student Enrolment Data1 Australia 2016 , 12 December 2016; Australian Government Department of Education and Training international Student Data 2016 pivot Darling Square, Sydney7 Savills market report Australian Student AccommodationCLV, UNSW, Sydney market Focus SydneyThe total development pipeline in Sydney has increased from 3,665 beds in 2016 to 5,435 beds in 2017.