The number of students in higher education in Asia Pacific has bounced back after the pandemic, opening up opportunities for real estate investors to provide purpose-built accommodation.

Real estate investors worldwide are targeting resilient sectors with a strong operational element, so student accommodation is proving attractive in many places. For example, Savills Research predicts €12 billion will be invested in purpose-built student accommodation (PBSA) in Europe over the next two to five years.

Australia is the most developed market in the Asia Pacific region, with a number of specialist operators. International students are a key driver of the market, in contrast with India, where huge demand for accommodation is driven by domestic students.

Other markets in the region offer potential, however India and Australia have seen most interest from real estate investors.

Australia

International students are an important tenant group for Australian PBSA and registrations for student visas exceeded 250,000 last year, a record total, and could top 300,000 by 2025, Savills Research predicts.

However, nationwide student vacancy rates are less than 1%, meaning much more accommodation needs to be delivered. While the PBSA market used to be centred on Sydney and Melbourne, now all Australia’s major cities are seeing activity and demand.

“We consider there to be a strong case for outperformance in PBSA rental growth over the next five years, as the planning and development environments in Australia are not conducive to rapid acceleration of supply to meet the critical shortage of accommodation for students in all the main capital cities, says Conal Newland, Head of Operational Capital Markets at Savills Australia.

Almost 79,000 PBSA beds are now available across Australia’s eight state capitals, with an additional 4,907 beds becoming operational in 2023. However, only 7,700 new beds are slated to be delivered in 2024-2026, suggesting strong rental performance, especially as rents can be rebased each year or, in some cases, each term.

The Australian PBSA market is diverse, with the list of largest operators featuring sector specialists such as Scape and Iglu, Australian managers such as Dexus and GPT, as well as overseas real estate investment managers including Blackstone and Nuveen.

Despite rising interest rates and cap rates in most property sectors, Australian PBSA cap rates held steady in 2023, reflecting the keen interest from investors.

India

With nearly 40 million students in higher education, India has the potential to become a significant student housing market, especially as students are increasingly likely to study away from home.

Diksha Gulati, General Manager, Research & Consulting at Savills India, says: “Demand for student accommodation has been witnessing a steady revival since the pandemic-induced pause. This has led to more 10% rental growth over the past two years.”

The student housing sector in India is attracting significant interest from institutional investors. Last year saw India’s largest student housing transaction, when Alta Capital acquired Goldman Sachs’ and Warburg Pincus’ 100% stake in the country’s largest student housing platform, Good Host Spaces, for $320 million. “The steady rise in investment appetite among global investors for this asset class is an indicator of growth prospects,” says Gulati.

The student housing market is being transformed by AI, says Gulati. In November, Good Host Spaces collaborated with tech firm SpaceBasic to develop AI solutions for student housing. The collaboration will use automation and data-driven insights to optimise property management, maintenance, and administration.

Further reading:
Australia Student Accommodation report

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Diksha Gulati