The rise of student accommodation

27 May 2015

Students

The recent depreciation of the Australian dollar has made it cheaper and easier than ever for international students to live and study in Brisbane.

In addition, Brisbane City Council has also embarked on a new strategy to encourage the development of new accommodation for an expected influx of international students in the future.

It is an opportunity Brisbane-based Blue Sky Alternative Investments has firmly in its sights and with over $1 billion in assets under management, the company’s investment model is attracting plenty of interest. 

Chief Investment Officer Alex McNab said Australia’s alternative asset space continued to evolve with new concepts and asset classes, especially within the emergence of social infrastructure – the provision of social-housing like student accommodation. 

“We are very attracted to student accommodation. Education export is a huge industry and there is a shortage of student accommodation in Australia and Brisbane. And we think it is likely to be an asset class reasonably resilient in the face of economic fluctuations,” Mr McNab said. 

In February this year, Brisbane Lord Mayor Graham Quirk announced a new temporary three-year reduction in council’s adopted infrastructure charges for student accommodation developments within a 4km radius of the Brisbane GPO. 

The reduction would be complemented by a new infrastructure charge category by Queensland Urban Utilities for water and sewerage connections for student accommodation developments. 

The incentive was designed to boost high-quality accommodation options for students attending higher education campuses and teaching hospitals.

“If Brisbane can position itself as a destination for international students and we have a planning environment that is reasonably sympathetic to student accommodation, then a student accommodation industry will follow,” Mr McNab said.

“Brisbane is easier to get around – it is a smaller, friendlier city – and Graham Quirk our Lord Mayor is just an outstanding ambassador for international education in Australia. 

“Ultimately the key driver of the student accommodation market is international students and I think Brisbane has an advantage to be highly competitive to Sydney and Melbourne due to the quality of universities that we have; the quality of living.”

Blue Sky puts investors’ funds to work across a range of alternative assets, including private real estate, infrastructure, private equity, venture capital and water entitlements.

The listed company has seen its share price rise more than 50 per cent this year and Mr McNab said a key driver of the growth was the changing face of the investor. 

“Alternative investment managers in Australia have traditionally been very focused on large institutional investors, but now we’re seeing two trends challenge that – one is the rise of self-managed super funds, they now account for about 40 per cent of the market – and the rise in high-net worth individuals,” he  said.

Blue Sky’s success to date has been its ability to attract the right talent to the business – investment managers who can sniff out a good deal for their client. 

“Brisbane’s advantage over Sydney and Melbourne in the investment space is the quality of our people – the schools and universities in Brisbane produce really high-quality people, many of them go on to sensational careers in New York, London and Tokyo. They usually return, for family or lifestyle reasons, to Brisbane,” Mr McNab said.

He added that despite recent decreases by the RBA in the official cash rate, resulting in record lows, the overall economy remained sluggish. 

“We continue to be bearish about the future of the Australian economy, which informs our view around a bunch of factors. We believe interest rates will stay low for a long time, we see the dollar staying low and don’t see any reasons for it to go up, so we want to invest in things that people need rather than what people want.” 

However, in a positive note for the local economy and property investors looking for the next opportunity, the Brisbane property market is starting to show promise, after so long languishing behind Sydney and Melbourne in terms of growth.   

“The Brisbane property market is likely to be far more resilient than in Sydney and Melbourne. We have seen very strong price growth down south and that is yet to come in Brisbane and we believe that will continue to underpin the Brisbane property market for some time to come, which is a really important driver of all sorts of activity in the Brisbane economy. We should see uplift in tourism in Queensland with a lower dollar, and we expect it to go lower,” Mr McNab said. 

Blue Sky Alternative Investments is a previous winner of the Lord Mayor’s Business Awards, taking out the Australia TradeCoast Award for Business Growth and Optus Business Platinum Award in 2013.

Established in 2006 as a private equity investment manager, Blue Sky Alternative Investments Limited is now an Australian-based diversified alternative asset manager specialising in four asset classes; Private Equity, Private Real Estate, Hedge Funds and Real Assets. The company listed on the Australian Securities Exchange in January 2012 (ASX:BLA). Blue Sky is headquartered in Brisbane, with offices in Adelaide, Sydney and New York, and the staffs collectively own a large part of the business, and invest heavily in its funds.

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