Australia’s tertiary institutions are feeling the effects of limited international student numbers and revenue on their balance sheets, with Federal Government proposed university fee adjustments potentially another catalyst for change.
As a result of the challenging environment, many institutions are reducing their accommodation footprint and looking at monetising assets - and simultaneously revising learning models to cope with the pandemic.
Despite this, they remain critical infrastructure to Australia’s future - and a key piece of the life sciences puzzle, which has been a rapidly emerging property sector in recent years. Arguably, the overlap between education and health has never been more important, which is evidenced by the continued investment interest in this burgeoning sector.
Over the past decade, life science real estate has gained institutional investment acceptance, with REITs, private equity and foreign entities injecting US$6.8bn into the US sector in 2019 – reflecting 95% growth year-on-year. It’s a similar story in Australia, with $549 million worth of private healthcare in medical centres and hospitals transacting during 2019 – an uplift of more than 100% from 2018.
Australia’s tertiary system is fundamental to creating a skilled and educated workforce. Adding value at the front and back end of the traditional value curve is one of Australia’s greatest opportunities at present – a real opportunity to differentiate and build on many world-leading industries, with these developing precincts and their ecosystems a key contributor to this.
The Parkville campus of the University of Melbourne is an exemplar of this, with the institution anchoring the precinct with several major hospitals. From those foundations, a rich research and innovation district has developed over time to include world-class medical research and associated entities.
Other new emerging precincts underway in Australia include the Tonsley Innovation District in South Australia, Fishermans Bend in Victoria, Western Australia’s Murdoch Health & Knowledge Precinct, Westmead in New South Wales and Herston Quarter in Queensland.
Looking forward, sustainability will have a larger influence on both new and existing developments in the sector. As a result of COVID-19, there has been greater emphasis on hygiene and cleaning, particularly within laboratory spaces. These spaces are already generally more expensive to operate given their higher rates of energy and utility consumption, therefore improving sustainability will be critical to help lower running costs, which is particularly pertinent during an economic downturn.
The Federal Government’s plans to incentivise STEM courses from 2021 will also go some way towards helping stimulate the downstream development of more specialised laboratory and medical facilities in the future – and in turn address strategic priorities around health, domestic security, food safety and quality, sustainable energy and the environment.
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