Build-to-rent, student housing tipped for growth in Adelaide

Build-to-rent and student accommodation are emerging as important alternatives to traditional housing as developers find new ways to ease SA’s housing shortage.

Andrew Ballantyne expects student accommodation and build-to-rent growth in Adelaide.

Build-to-rent and purpose-built student accommodation (PBSA) are emerging as important segments of Adelaide’s wider housing market, according to JLL’s head of research, who says stronger population growth in the city will fuel alternative approaches to new developments.

JLL Australasian head of research Andrew Ballantyne, who visited Adelaide last week to present to a group of local investors, said the city had emerged stronger out of the pandemic, with its advantages in high growth industries including defence, technology, health and education capturing the attention of investors.

“You look at the type of cities that Adelaide is in the same territory as – it’s Copenhagen, it’s Seattle, it’s Stockholm and Dublin. These are really what I’d call high-growth cities,” he said.

“They’ve got exposure to financial services or technology or life sciences, health – they’ve got exposure to the growth sectors of the economy.

“I think Adelaide is in quite an interesting position. It’s got an exposure to those sectors, and now you’re actually starting to see that migration piece have a positive impact on overall population growth.”

The most recent ABS figures show the state’s population grew by 1.7 per cent in the 12 months to June 2023, with more than 90 per cent of the growth drive by net overseas migration.

Adelaide’s biomedical precinct on North Tce. Picture: Supplied by Knight Frank

For the property market, Mr Ballantyne sees higher migration rates translating to demand for alternative types of housing including PBSA.

“If you look at the student numbers, pre-Covid South Australia was 4.5 per cent (share of Australian total) international student enrolments – it’s now 5.9,” he said.

“So it’s actually been growing share over that time period, which is obviously positive, not just for population growth, but positive for the education sector, positive for PBSA.

“Essentially, purpose-built student accommodation is pretty much full and they’re seeing some pretty good rental growth.”

Build-to-rent is also emerging as an important market, according to Mr Ballantyne, as investors find new ways to ease housing shortages across the country.

Build-to-rent projects, a form of long-term rental housing relatively new to Australia, have sprung up along the eastern seaboard in recent years, but the pipeline in Adelaide remains small, with JLL estimating a total pipeline of just 715 units.

However, Mr Ballantyne believes it’s only a matter of time before investors expand into the Adelaide market.

“A lot of the groups that are driving it are offshore, who have partnered with local groups that have the ability to execute on that strategy. And for a lot of offshore capital, they simply do gravitate to the gateway cities first,” he said.

“A number of those projects are now starting to open, and virtually all of them are seeing occupancy rates above where they expected to be, and also seeing rents that are higher than what they had in their development feasibility.

“So I think now you’re starting to see the success of that first wave of development, and ultimately those groups then start to say, well if we’re going to grow we need to think about geographic diversification.”