COVID-19 has cooled Australia’s student accommodation sector. But a strong rebound is on the cards – provided we can welcome students back soon.
There are now 109,000 beds in purpose-built student accommodation, or PBSA, across Australia. Eighty-four per cent of all beds are located in our eight capital cities. More than 13,200 beds are under construction, with an additional 9,775 beds expected to enter the market in 2021.
Newland says investors have been attracted to the sector’s strong underlying fundamentals, stable income streams, and the desire to diversify portfolios. “Before the start of the pandemic, all of the operators we deal with were at record bookings and near capacity,” he explains.
Domestic student numbers at universities have risen – in some cases by record numbers – as Australian students forego their gap years and commence post graduate studies. But Newland says this domestic demand has not offset the shortfall in international counterparts.
The sector has been hit hard by COVID-19. In December 2020 just 230 international students arrived in the country, according to the Australian Bureau of Statistics. This was a decrease of 38,460 students (-99.4%) compared to December 2019.
“With Australian borders remaining closed heading into Semester 1 2021 optimistic operators are forecasting occupancy levels of 50 per cent in 2021,” Newland says.
Tough times in 2021
Richard Smith, director of PBSA operator Iglu, says uncertainty about when international students can return to Australia “has placed the entire sector on a precipice”.
With no clear timeline, operators have had to “mothball” facilities, Smith says. Some operators have seen occupancies decline by up to 80 per cent “in stark contrast to countries where borders have remained open to student mobility”.
Almost 40 per cent of people with Australian student visas aren’t in the country, and some media reports suggest students are looking to other destinations “as they run out of patience waiting for Australia’s border to reopen”.
The United Kingdom, United States, Europe, Canada and New Zealand all have policies in place to allow international students to enter, subject to quarantine protocols. “This is eroding Australia’s valuable market share and undermining our competitiveness,” Smith adds.
Federal education minister Alan Tudge has said the Australian Government wants international students back in Australia “as soon as possible” but has conceded it would “very difficult” for large numbers to return in 2021. Universities had hoped international students could return to class by the second half of 2021.
Education is Australia’s third largest export industry, contributing $41 billion to the national economy and supporting more than 250,000 jobs. International students also bring vibrancy to our city centres.
“For every dollar spent on tuition by international students, over four dollars is spent in the Australian economy and supports jobs in the retail, hospitality, transport, property, and services sectors,” Smith explains.
Innovation and optimism
Tomas Johnsson, chief executive officer of UniLodge, believes Australia has “cemented” its reputation as a safe destination, “which over the longer term may play to our advantage”.
But Johnsson’s optimism comes with a warning.
“A continued timid approach to international borders will have long-lasting negative effects. By July, we will have lost four consecutive international intakes with accumulated negative impact unless Australia gets serious about a solution. Once those potential students take a place in Canada or elsewhere, we have lost them – with a negative impact being felt over the next three or four years as they can’t be replaced.”
Johnsson says the sector has been “incredibly innovative” in recent years “with the development of extraordinary design-rich buildings with exceptional amenities”. Since COVID-19, the sector has channelled this innovation towards “safe custodianship” of students.
“We have developed detailed protocols and best-practice procedures to manage many thousands of students. It has been challenging at times, as COVID-19 has been prescribed eight different solutions – one per each state and territory. The sector has been busy creating and re-creating health plans,” Johnsson explains.
Iglu’s Smith points to the “successful and safe completion” of an international student quarantine pilot in Howard Springs as a step in the right direction. Charles Darwin University’s pilot program in December saw 63 international students return to our shores. The university estimates that these students will contribute more than $40,000 to the local economy each year.
A scheduled pilot in Adelaide is another bright spot, Smith says, and “suggests that international students could return to Australia without unduly impacting the number of returning Australians”.
Time to welcome students back
Savills’ Newland is also positive about the future of PSBA in Australia.
“Operators were, by and large, well-capitalised and in a good position to ride out the first 12 months of the pandemic. While 2021 will be tough year for the operators, I’m optimistic about the potential velocity of the bounce back,” Newland says.
“You only have to see how Australia is performing generally in its management of the pandemic against key higher education competitor countries – like the US and UK.” The historically-low Australian dollar will also act as a student magnet.
Smith says the design of student accommodation itself is an “attractive drawcard”.
“Our buildings allow for social distancing and the provision of natural light, operable louvre windows and individually-controlled heating and cooling,” he explains. The domestic market now has a clearer understanding of PBSA’s “focus on student welfare, community programs and in-house amenities”.
PBSA operators have demonstrated that they can “provide a safe and supportive environment with 24/7 on-site support and studio rooms to safely manage quarantine and a less intensive self-isolation process as required,” Smith adds.
As Newland says: “Everything is in place – the only missing ingredient is getting students back across our borders.”