Australian student accommodation yields to fall as class matures
Yields on Australian purpose-built student accommodation (PBSA) are predicted fall into line with core property markets as the class matures. In the past year, only one transaction of more than AUD400m ($311m) has been completed due to the lack of available assets. But Noral Wild, head of social infrastructure at JLL, predicted that transactions will increase over the next three years as PBSA assets complete building, start operations and stabilise occupancy. Wild said PBSA yields would fall towards those in the office sector, estimated to be about 5.5% in 2020.

"It is at this stage that the assets offer the greatest attraction to investors who seek stabilised assets with lower occupancy risk and a proven operational platform.

"As such, we expect to see PBSA yields continue to sharpen over the next three years of the development and operational cycle to levels equivalent to office sector yields, anticipated to be around 5.5 per cent in 2020."

Sydney and Melbourne will have the sharpest yields on student dorms, ranging between 5.5 per cent and 6.25 per cent, according to JLL.

Yields in Adelaide and Brisbane are forecast to fall between 6.75 per cent and 7.25 per cent.

Performance

Among the factors the JLL analysis considered is the performance of the PBSA sector in other countries – including Europe, Britain and the United States – where it is regarded as a sustainable investment-grade asset class.

"Initially, PBSA yields offered a premium of around 25 to 100 basis points," Ms Wild said.

"But a trend is emerging showing PBSA yields coming more into line with core property markets."

A wave of development is under way in Australia, with players including Scape Student Living, Blue Sky Private Real Estate and its joint-venture partner Goldman Sachs, Dubai-based student accommodation provider GSA and South Africa's Redefine Properties all pursuing major projects.



