BRISBANE

Where has the student market come from and where is it going?

29th November 2016

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Introduction & Past Experience

PAULSAVITZDirector

Research&Consul;ng

8+yearsexperienceinresearchingpurpose

builtstudentaccommoda;on

(PBSA)marketsacrosstheUK,Europeand

Australia

SupplyandDemandAssessments Valua;onSupport

StudentExperienceandNeedSurveys

ResearchReports&WhitePapers

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Knight Frank - Global

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Knight Frank - Local

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Agenda

§  Current Demand & Supply Imbalance

§  Future Demand & Supply – Growth?

§  Importance of PBSA §  PBSA Sector Investment & Development

§  Outlook

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Student numbers trending up

Source: Knight Frank Research, Department of Education and Training (full time students)

§  Theposi)onlastyearshowingsolidannualgrowthfrom2001onwards

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Student numbers trending up

Source: Knight Frank Research, Department of Education and Training (full time students)

§  1,000,373studentsenrolledonafull)mebasis,up2.8%from972,336in2014

§  Thenumberoffull;meinterna;onalstudentsenrolledatAustralianHigherEduca;onIns;tu;onshasshownposi;vegrowth(5.5%)forthethirdconsecu;veyear

§  Adeprecia)onoftheAustralianDollar,growinginterna)onalrecruitmentpolicies,highlyrankeduniversi)es,increasingconfidenceinstudentsafety,andthesimplifica)onofstudentvisaapplica)onshavefacilitatedthisreturninggrowth

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International students at record levels

Source: Knight Frank Research, Department of Education and Training (full time students)

§  Theposi)onlastyearshowingsolidannualgrowthsince2012

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International students at record levels

Source: Knight Frank Research, Department of Education and Training (full time students)

§  15yearaverage=29.6%ofallfull)mestudents

§  2015recorded30.9%§  Interna)onalstudentshavegrownby

165%since2001,from116,304toanewpeakof308,704in2015

§  40,834moreinterna)onalstudentsthanin2012

Whyareinterna;onalstudentsimportant?

§  1)Theypayhighertui)onfeesthandomes)cstudents

§  2)Morelikelytorequireaccommoda)onasonthewholetheydonothaveaccesstoadomes)cresidence

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And the economic benefits are huge

Source: Knight Frank Research, ABS

§  Australia'sannualeduca)onexports(interna)onalstudents)soaredtoanewhighof$21bn

§  27%ofeduca)onexportrevenuewasfromChinesestudentsinyeartoSeptember2016

§  Overtwo-thirdsofeduca)onexportearningsgotoNSWandVictoria,withQueenslandearning15%,WA7%andSAonly5%

§  Studentsinhighereduca)onsupply70%ofeduca)onexportearnings

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Demand is growing…

Source: Knight Frank Research, Department of Education and Training (full time students)

§  79%ofinterna)onalstudentslocatedacrossNSW,VICandQLD

§  BothNSW&Vicrecordedannualgrowthinoverseasfull;mestudentsthispastyearof8.3%and7.6%respec;vely

§  Qldactuallyrecordeda1.0%fall

EasternSeaboardarethelargestmarketsfor

interna;onalstudentsandisalsowheregrowthhasbeen

strongest

November 2016

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However… supply doesn’t add up

Source: Knight Frank Research

§  KnightFrank’sanalysisofPBSAacrossAustraliaindicatesafigurecloseto92,143

§  Takesintoconsidera)onthecomple)onof5,611PBSAbedspaceswhichbecameopera)onalin2015and4,593newbedsin2016

§  TheEasternSeaboardstatesofQueensland,NewSouthWalesandVictoriaaccountforover78%ofallPBSAbedspaces

14,921

33,172

23,450 National: 92,143

5,933

965

4,720

7,469

1,513

Growthinstudentnumbershashistoricallyoutweighed

thegrowthinPBSA

11.6 / 3.0

8.9 / 2.5

12.4 / 4.9

16.6 / 4.9

6.4 / 2.2

14.3 / 3.7

3.1 / 1.2

11.7 / 3.1

November 2016

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Student to bed ratio

Source: Knight Frank Research, Department of Education and Training

§  1PBSAbedspaceforevery3.4FTinterna;onalHEstudentsna;onally

Highlightstheacutenessoftheshortageinstudentaccommoda;on

National: for every 1 PBSA bedspace there are

10.9 FT HE students

Cambridge = 1.9

Edinburgh = 3.2

Newcastle = 3.0

4.3 = Glasgow

Sheffield = 2.7

Nottingham = 2.5

London = 3.3

Southampton = 3.0

1.6 = Oxford

York = 4.0 Leeds = 2.5

Leicester = 2.2

2.8 = Bristol

September 2016

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Placing those figures into context…

Source: Knight Frank Research, HESA

Perth

Highlightsthematurityof,and

accessibilityof,thestudent

accommoda;onmarketinother

na;ons

Na;onssuchastheUKcompetewithAustraliafortherecruitmentof

interna;onalstudents

§  TheUKPBSAmarkethasnowmaturedintoasectorwherethetransac)onofassetsandlandhasaveragedover£5bnoverthepasttwoyears

3.0 = Manchester 2.3 = Liverpool

3.1 = Birmingham

November 2016

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Future supply pipeline is increasing…

Source: Knight Frank Research

§  Greaterinterest&knowledgeofthesector–anunderstandingofundersupplylevels

§  KnightFrankes)matethat36,675PBSAbedspaceshavethepoten)altobecomeopera)onalbytheendof2021

§  IfallisbuiltmajorityofnewstockwillbedeliveredacrossSydney(12%),Melbourne(24%)andBrisbane(31%)

§  Currently11,478PBSAbedspacesintheBrisbanesupplypipeline–Doubledoverthepast18months

§  TheCityCouncilhasadaptedplanningregula)onstoallowforreduceddevelopercontribu)onsonsiteswhichfallwithinspecifiedparameters

13,760

6,086

9,161 National: 36,675

3,365

0

1,967

1,796

540

…pipelineto2021

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Delivery of new PBSA bedspaces to peak in 2019…

Source: Knight Frank Research

§  Withsignificantstudentaccommoda)ondevelopmenteitherplannedorunderwaythroughoutAustralia,comparedwithhistoricdevelopmentlevels,aninferiorschemewillquicklyprovetobeanunviableasset

§  CurrentlyasaresultoflimitedsupplyofqualityPBSA,AustralianIns;tu;onsarereliantontheprivaterentedresiden;almarkettowhichtheyhavenocontrol

§  Goingforwardthiscouldimpactontheirabilitytorecruitthebeststudents,nega;velyimpac;ngtheirposi;ons,andreputa;ons,inworldeduca;onrankings

November 2016

…andcompe;;onamongstoperatorswillincrease

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Residential supply has increased but…..

Source: Knight Frank Research, Residex, REINSW

…rentalgrowthiss;llrisinginthethreebiggeststudentci;es–albeitmoreslowly

§  Vacancyindicatorsshowthatthereisroomforrentstogrowfurtherastotalvacancyremainsbelowthe3%equilibrium

§  GoodnewsforPBSAdevelopers,operatorsandinvestors

§  Latentdemand

§  Rentalpicturenotposi)veeverywhere–Perthfalling

§  PBSAappearstobealowriskinvestment…ifyougetitright!

September 2016

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Domestic population Growth will drive demand

Source: Knight Frank Research, ABS

§  Indica;onsarethatdemandforHigherEduca;onplaceswillcon;nuetorise,asthekeystudentdemographic(18-22yearolds)con;nuesitsupwardgrowthtrend

§  Theincreasein18-22yearolds,projectedatanaveragegrowthof0.6%perannumoverthenext10years,or83,415inabsolutenumbertermswillunderwritesignificantexpansioninAustralianHigherEduca;onprovision

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Global student mobility to increase

Source: Knight Frank Research, OECD, Böhm et al 2003

§  Educa)onisanincreasinglyglobalmarketplace

§  Thenumberofstudentsahendinguniversityoutsidetheirowncountryisforecasttomorethandoubleby2025

§  AnopportunityforAustralianHigherEduca)onIns)tu)onstoincreasetheirstudentintake–alreadyoneofthehighestrecipientsofinterna)onalstudentsalongsideUS,Canada&UK

§  Andanopportunityfordevelopersandinvestorsintostudentaccommoda;on

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All leading to a continued increase in mobile students

Source: Knight Frank Research, UCA

§  Mobile,highereduca)onstudentsarecountedasthesumofdomes)cfull-)meinterstatestudentsplusdomes)cfull-)meintrastatestudentswhomustleavehometoajendtheirchosenuniversityplusonshorefull-)meinterna)onalstudents

§  Therewasanincreaseof47%inthenumberofmobilehighereduca)onstudentsovertheperiod2004throughto2013

§  Equatestoa4.4%compoundannualgrowthrateoverthesameperiod

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And a need for more accommodation

Source: Knight Frank Research, UCA 2014 Census Report

§  Usingpastgrowthtrendsofmobilestudentstoes;matefuturegrowth,by2024,therecouldbeover500,000mobilestudentsinAustralia

§  Withoutasignificantincreaseinpurposebuiltstudentaccommoda;onwherewillthesestudentslive?

§  Thisisanincreasinglyimportantissueas…

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affordability decereases

Source: Knight Frank Research, Department of Education & Training: International Student Survey 2014

§  Sa)sfac)onwithAustralianaccommoda)oncostsaccordingtotheInterna)onalStudentSurvey2014hasdecreased:

§  2010=60%sa;sfac;on

§  2012=51%sa;sfac;on

§  2014=49%sa;sfac;on

§  Thesedecliningsa)sfac)onlevelscouldbereflec)veofthecostoflivinginAustraliacomparedwithhomecountriesforinterna)onalstudents

§  Orchangingexchangerates

§  Butlikelytobebecauseofincreasingrents–aresultoflimitedsupply&growingdemand

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And students are now demanding more

Source: Knight Frank Research, Unite Students

§  UniteGroup–50,000studentbedspaces,140proper)es&afurther7,000inthedevelopmentpipeline

§  Applicantsincreasinglyseeaccommoda;on-andthequalityofaccommoda;on-asabigdrawforapplyingtoapar;cularuniversity

§  “THERISEOFTHESTUDENTASACONSUMER”

§  In2014aquarterofApplicantsconsidered‘goodqualityaccommoda;on’animportantfactorforchoosingauniversity.Thatrosetooverathird(35%)in2015.

§  MorethanafiqhofApplicants(22%)saytheaccommoda;ononofferisoneoftheirtopthreereasonsfortheirchoiceofuniversity.Both‘academicsupport’and‘agreatnightlife’werebeatentothespot

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Services & location most important

Source: Knight Frank Research, Unite Students

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investors are recognising the opportunity

25 Source: Knight Frank Research

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Investors are circling

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§  GrowingknowledgeofundersupplyandthePBSAsector

fundamentals

§  HigherEduca;onins;tu;onstoconcentratemajorityoffundson

researchandteaching–notonprovingaccommoda;on

§  Lowriskinvestment–latentdemand

§  Demandforalterna;veinvestmentassets–bothdomes;cally

andglobally

§  LowinterestratesandfallingcostofdebtmakeAustralianreal

estateyieldahrac;veandastableinvestment

§  Planning&developmentencouragement&support(Brisbane)

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Outlook for the PBSA Sector

BRISBANE

Discussion & Questions?

paul.savitz@au.knightfrank.com

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Disclaimer

© Knight Frank Australia Pty Ltd 2016 – This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank Australia Pty Ltd for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank Australia Pty Ltd in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank Australia Pty Ltd to the form and content within which it appears.

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