This article was originally published in businessnews.smedia.com.au written by Claire Tyrrell. 

Optimal time for student housing

Market conditions have paved the way for more developers to operate in Perth’s student accommodation sector.

 

The timing of Sirona Urban’s entry into the student accommodation market was no coincidence.

The Matthew McNeilly-led developer swooped on 319-335 Wellington Street late last year, following a failed plan to construct a student housing tower by Blue Sky Real Estate.

Sirona, with Australian Unity and MaxCap, bought the 1,400 square metre former Army Surplus Store site for $11 million in September, with builders on site the following month.

“We have been deliberately selective about the site,” Mr McNeilly told Business News.

“It had been identified for student accommodation, went through a couple of hands before we got hold of it, [and] had a development approval in place.

“All we’ve done is modified the existing DA to bring it up to five years of modernisation.”

Tier one construction group Built picked up where the project left off four years ago when it carried out groundworks on the site.

In the period since the project was put on hold, the state’s student housing market has evolved to a point where there are more opportunities for developers.

 

Residential rental vacancies dropped from about 3 per cent in 2019 to 0.7 per cent in 2023, indicating Perth is among the tightest rental markets in the country.

Property Council of Australia data for Western Australia shows there are 27 tertiary students for every purpose-built student accommodation (PBSA) bed.

This is significantly above the national average of 19, which suggests a relative undersupply compared with other states.

“Purpose-built student accommodation plays a vital role in releasing pressure on the housing market. If dedicated student accommodation is unavailable, students seek out housing in the general residential market, competing with local families,” Property Council of Australia WA Division interim executive director Emily Young said.

Urbis research found that Perth has added 1,427 PBSA beds since the start of 2021, including The Switch Co-Living space in Northbridge, which is not solely occupied by students.

The research also indicated that almost all of the state’s 9,000 student beds were occupied.

Urbis associate director Suzie Turner told Business News this trend was expected to continue, but projects in the pipeline were a promising sign.

There are currently about six student accommodation projects at various stages across WA, including Exal Group’s $110 million Waterford project.

 

Construction began on the student accommodation facility, near Curtin University, last year after several delays linked to the collapse of its former builder FIRM Construction.

In addition, a proposal to build a 32-storey student accommodation tower at 609 Wellington Street in Perth was lodged late last year.

Designed by national architecture firm Rothelowman, the 832-bed UniLodge facility is due for completion in 2026, pending approvals.

“After so many years of not having any development of student accommodation … now it’s all systems go,” Ms Turner said.

“We have seen huge student numbers, and 2024 is looking really positive.”

Federal Department of Education figures show that international student enrolments skyrocketed in WA in 2023 to 66,260, up from 39,879 the previous year.

Nationally, 869,960 international students enrolled in Australian institutions in 2023, with NSW claiming the most of any state with 345,571.

Data from CBRE shows the supply of PBSA increased nationally from about 3,000 rooms in 2010 to 41,000 rooms by 2022, with a further 8,000 rooms to be added by 2026.

In WA, there are at least 2,400 student beds to be delivered within the next two years.

Edith Cowan University’s $853 million Perth CBD campus, on track for completion in the first semester of 2026, has been a catalyst for the growth of student accommodation projects in the CBD.

The campus is expected to bring 10,000 students and staff into the city.

Mr McNeilly said as Perth’s first CBD campus, the university could help draw more international students and act as a catalyst for other educators to follow.

He said Perth was punching below its weight in terms of the volumes of international students it attracted relative to its population.

“Our theory on why that is is because we’ve never been able to offer a city campus or a city urban lifestyle to students,” he said.

“We’re competing with Melbourne, Sydney and Brisbane. Students have shown a clear preference to go to those bigger cities, very vibrant CBDs, to live and to study, irrespective of where the campus sits Mr McNeilly said if Perth offered a more diverse lifestyle, the state would be closer to getting its fair share of international students.

“There’s no reason why an international student from UWA, Curtin, Murdoch, ECU can’t live in the CBD and commute to wherever their campus is, because they’re actually looking for lifestyle,” he said.

“That’s as important a motivation as the study itself.”

Murdoch University abandoned its plans for an inner-city campus in 2022, citing the financial implications of COVID.

However, it’s likely universities will have a greater presence in Perth in coming years, via campus facilities and student accommodation.

CBD Revitalised

Sirona Urban, which has been credited with the regeneration of parts of Fremantle, is shifting its focus to Perth as part of its $110 million Wellington Street development.

The Baldock family office-backed developer is relocating its offices to 216 St Georges Terrace (London House) in mid-2024.

This follows Leonie Baldock’s purchase of the CBD asset from Hawaiian in 2022 for $102 million.

Mr McNeilly said he was driven to pursue student accommodation for its potential to improve the character of Perth, which he described as an opportunity too good to miss.

“I’ve cut my teeth down in Freo, and urban regeneration is the thing that really interests me,” he said.

“The idea is for Sirona to focus on urban regeneration, but let’s have a crack at the Perth CBD [and] developing projects here.

“This will be the first of many, I have no doubt.

“I see this part of town as unloved, and it’s got some significant issues, which are to the detriment of the whole CBD.

“If we can fix this, Perth becomes an amazing place, and ultimately it will be at that point where people will want to live here.”

Advocates of CBD development have called for a greater residential population in Perth, which commentators say would reduce antisocial behaviour and increase vibrancy.

However, Mr McNeilly said student accommodation would provide a faster solution to the problem. “If we hang our hats on residential and people building apartments in the city, I think that’s a long-dated story that’s going to take decades to come to fruition,” he said.

“Resolving the student accommodation story can be achieved pretty damn quickly; it’s a much quicker fix.”

Mr McNeilly said student housing appealed more to builders than residential projects in an uncertain environment characterised by unprecedented cost escalations.

The project’s builder, Built, quietly exited the apartment market when it pulled out of its plan to construct Edge Visionary Living’s Lumiere development in South Perth last year.

“The great fear of residential is you’re dealing with 200 owners of apartments in terms of rectifying defects, but this is just a simple one-owner [project],” Mr McNeilly said.

He added that Built had a good relationship with the facility’s operator, UniLodge, which manages 36,000 beds across 105 student housing developments nationwide.

MaxCap and Australian Unity are providing financial backing for the project, as well as Sirona.

By design

Rothelowman’s Wellington Street project marks its first foray into student accommodation in Perth, but the national architecture studio has a long history with the sector Australia wide.

“Rothelowman has been designing student accommodation nationally for close to 20 years, and we’re currently designing student accommodation in virtually every capital city of Australia.,” Rothelowman Perth principal Kylee Schoonens told Business News.

Ms Schoonens said the emphasis when designing PBSA facilities was on maximising the floorplate of a building and providing extensive shared amenity.

“It’s about trying to create a really efficient floorplate to maximise yield,” she said.

“It’s also important to understand how students want to live, therefore creating spaces that are generous where needed to ensure a connected community is created.”

Rothelowman raised the number of beds on the 1,398sqm site from an initial 600 to 832 by revisiting the planning provisions related to the area.

Ms Schoonens said the student housing model had progressed in recent years, with design having played an increasingly important role in the process.

“Design has progressed significantly from the old dorm-style student accommodation,” she said.

“In good student accommodation there is variety and students have choices. They can either live in their own studio apartment, with someone in a twin, or with groups in a four-, five- or six-bedroom larger apartment with shared kitchen and lounge areas, but everyone has their own bathroom.

“Every operator has their own preference as to what their mixes are, but that’s generally the idea.” Corbel Property, run by former Parcel Property bosses Ross Catalano and David Klein, is providing development management services for the project.

The Property Council is urging the state government to include PBSA projects for funding through its $80 million infrastructure development fund, which helps fund utility connections to sites.

The council’s Ms Young said there was also an opportunity for the recently announced Housing Supply Unit to focus on revamping tax settings for specialist rental accommodation, including PSBA.

“The reality is we need rentals, and we need them now, so anything that can be done to enable developments to be delivered quickly and affordably should be explored as a priority,” she said.

This article was originally published in businessnews.smedia.com.au written by Claire Tyrrell.