Student accommodation in Australia will need to be repositioned in the short term as universities pivot to capture higher levels of domestic student enrolments.
This is one of the key findings from a new CBRE Viewpoint report, Education: Uplift During Downturns, which examines the impact of COVID-19 on Australia’s education sector.
CBRE Student Accommodation Research Manager Chinmay Chitale said domestic enrolments would be a key source of short-term demand given the current limitations on international student mobility.
“Considerable short-term disruption is expected as a result of COVID-19, with the existing travel restrictions forecast to result in materially lower international student intakes for the remaining academic year in 2020, and potentially the full academic year in 2021,” Mr Chitale said.
“However, it’s been demonstrated that domestic university applications increase during periods of high unemployment and this is a call to action for universities and Purpose Built Student Accommodation (PBSA) operators to reposition their facilities to capture this shift.”
CBRE’s report references the GFC, when a greater proportion of school leavers prioritised higher education to increase their employment prospects in a weakening job market.
It also notes a likely decrease in school leavers deferring their study to take a gap year (which currently represents about 10 per cent of student applications) if travel is still restricted in early 2021.
Universities will, however, need to seek additional government funding to afford any additional domestic student enrolments in excess of the cap imposed on university places in 2017.
“The potential increase in higher education funding could make for a relatively attractive trade-off for reduced welfare spending in the longer term as structural unemployment continues to increase,” Mr Chitale said.
Nevertheless, PBSA owners and operators will need to be cognisant of expected income shortfalls and a likely impact on values as international student numbers shrink, with CBRE Student Accommodation Director Rosie Young noting that uncertainty linked to COVID-19 could lead to a short term softening in capitalisation rates.
“The disruption to international student mobility will potentially impact PBSA occupancy levels and rental income for several years,” Ms Young said.
“Rent reductions or more flexible pricing options are anticipated in order to mitigate these demand impacts and stabilise occupancy moving forward. However, Scape’s recent purchase of the Urbanest portfolio does highlight longer-term investor confidence in the PBSA sector, despite the potential decline in international student enrolments.”
Moving forward, the report notes that sentiment towards studying in Australia remains positive, with 69 per cent of international students with current university offers expecting to commence their enrolments as planned according to a May study by the Student Accommodation Industry.
“On the assumption Australia continues to successfully manage the health crisis, we expect there to be some pent-up demand from students unable to study during the current academic year, once international borders and universities are safely reopened,” Ms Young said.
“There is also the potential for Australia to pick up additional enrolments from other international education markets such as the U.S., U.K. and mainland Europe as students place more emphasis on health and wellbeing considerations and choose locations with lower infection rates.”
This is one of the key findings from a new CBRE Viewpoint report, Education: Uplift During Downturns, which examines the impact of COVID-19 on Australia’s education sector.
CBRE Student Accommodation Research Manager Chinmay Chitale said domestic enrolments would be a key source of short-term demand given the current limitations on international student mobility.
“Considerable short-term disruption is expected as a result of COVID-19, with the existing travel restrictions forecast to result in materially lower international student intakes for the remaining academic year in 2020, and potentially the full academic year in 2021,” Mr Chitale said.
“However, it’s been demonstrated that domestic university applications increase during periods of high unemployment and this is a call to action for universities and Purpose Built Student Accommodation (PBSA) operators to reposition their facilities to capture this shift.”
CBRE’s report references the GFC, when a greater proportion of school leavers prioritised higher education to increase their employment prospects in a weakening job market.
It also notes a likely decrease in school leavers deferring their study to take a gap year (which currently represents about 10 per cent of student applications) if travel is still restricted in early 2021.
Universities will, however, need to seek additional government funding to afford any additional domestic student enrolments in excess of the cap imposed on university places in 2017.
“The potential increase in higher education funding could make for a relatively attractive trade-off for reduced welfare spending in the longer term as structural unemployment continues to increase,” Mr Chitale said.
Nevertheless, PBSA owners and operators will need to be cognisant of expected income shortfalls and a likely impact on values as international student numbers shrink, with CBRE Student Accommodation Director Rosie Young noting that uncertainty linked to COVID-19 could lead to a short term softening in capitalisation rates.
“The disruption to international student mobility will potentially impact PBSA occupancy levels and rental income for several years,” Ms Young said.
“Rent reductions or more flexible pricing options are anticipated in order to mitigate these demand impacts and stabilise occupancy moving forward. However, Scape’s recent purchase of the Urbanest portfolio does highlight longer-term investor confidence in the PBSA sector, despite the potential decline in international student enrolments.”
Moving forward, the report notes that sentiment towards studying in Australia remains positive, with 69 per cent of international students with current university offers expecting to commence their enrolments as planned according to a May study by the Student Accommodation Industry.
“On the assumption Australia continues to successfully manage the health crisis, we expect there to be some pent-up demand from students unable to study during the current academic year, once international borders and universities are safely reopened,” Ms Young said.
“There is also the potential for Australia to pick up additional enrolments from other international education markets such as the U.S., U.K. and mainland Europe as students place more emphasis on health and wellbeing considerations and choose locations with lower infection rates.”
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About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2018 revenue). The company has more than 90,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 480 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2018 revenue). The company has more than 90,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 480 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
