Big institutions splash out on student accommodation amid shortage
M&G Real Estate has bought the Park Avenue student accommodation complex in Melbourne’s Parkville.
The student accommodation sector is taking off nationally with UNSW snapping up a prime student accommodation complex near its campus in Sydney’s eastern suburbs and another block trading in Melbourne’s Parkville.
The nation’s supply of student housing has taken off, almost doubling in the past decade to more than 132,000 beds. Demand has been partly tempered by a crackdown on international student numbers, but there is still an overall shortage of beds.
Investors are being drawn in as the sector has shown its resilience in the wake of the pandemic, with high occupancy rates and rental growth topping the wider market.
In the Sydney deal, the university has pounced on a property that sits 600m from UNSW’s Kensington campus that was offloaded by Asian group SC Capital.
The property at 159-171 Anzac Parade & 1 Lorne Avenue comprises a 7884sq m of lettable area on a 2410sq m site. With a weighted average lease expiry of 13.5 years, the asset gives the university a crucial foothold in the area.
UNSW believes that by owning and operating more beds it can help put downward pressure on room rates and ensure the accommodation is of the highest standard. “We have a long history of developing, owning and managing student accommodation, and purchasing this site is consistent with the university’s long-term strategy,” a spokeswoman said.
There are 19 existing purpose-built student accommodation facilities in and around UNSW, totalling 4778 beds. Fifteen of the sites are UNSW-owned and operated facilities.
A surge of future developments is expected in the area with 10 student housing projects in the planning stages or under construction, with the potential to deliver 2200 beds in and around UNSW over the next five years.
The sale was brokered by David Curtis, Louise Burke and Raphael Sebban of Cushman & Wakefield, and JLL’s James Barber, Luke Billiau, Jack Bergin and Andrew Rojek, with interest from domestic and offshore investors.
Mr Curtis pointed to the CPI-indexed annual rental increases as a key factor in securing long-term, defensive income. “Uncapped market reviews every five years, with the next review in 2029, provide opportunities for enhanced rental growth,” he said.
“Additionally, favourable planning controls offer potential for future height uplift and redevelopment, subject to council approvals.”
Mr Bergin said the deal was an example of the high-quality student investment being in demand. “This asset’s strategic location near UNSW, combined with its long-term lease structure and potential for future development, makes it a compelling investment opportunity,” he said.
Park Avenue in Melbourne’s Parkville has 369 beds across 328 units and is near top universities.
The student accommodation sector is also taking off in Melbourne despite the downturn in much of the city’s commercial property market. Developers and investors are chasing assets in the living sector as it offers steady returns, while office blocks remain in the doldrums.
In the latest play, British giant M&G Real Estate has forged into the sector, picking up the Park Avenue complex for about $100m.
Park Avenue has 369 beds across 328 units and is near top universities, including University of Melbourne, Monash University and RMIT University. It is well-positioned to benefit from the upcoming Parkville metro station opening later this year.
The building sold on a yield of about 5 per cent in a transaction handled by JLL’s Jack Bergin, Luke Prokuda and Josh Rutman.
The purchase from global funds house Invesco marks M&G’s entry into the student sector and is in keeping with its Asia-Pacific “living strategy” to invest in high-quality assets.
Attention among investors in the “living sector” is now turning to a site that was bought by Wentworth Capital and Assembly Funds Management that is now on the block via JLL and Knight Frank.
The site, known as Royal Park Melbourne, is at 109 Manningham Street, and is one of the few completed and stabilised build-to-rent assets in Australia. The complex has 175 units and could spin off an income of more than $5m when fully leased.
The site was developed by Pace and was bought by the Victorian government as part of the East West Link. That project was later cancelled and the pair bought it and stabilised rents. It is expected to garner bids of about $100m.
