Education providers are looking to Australian CBD offices to attract international students demanding improved safety, connectivity and enhanced amenities, according to a new report compiled by JLL Research. 

While the international student market is worth more than $30 billion a year to Australia, the demand for student facilities is having a particularly strong impact in Melbourne.

According to the JLL report titled Sleeping Giant – Education sector demand in the Melbourne CBD, the education sector has accounted for 10.1 per cent of Melbourne CBD office space take-up over the last five years.

At a glance:

• Five out of Victoria’s six largest universities by enrolments have taken space in the CBD since 2014
• Education sector accounts for 10.1 per cent of Melbourne CBD office space take-up over the last five years
• Melbourne CBD vacancy levels close to a 30-year low in the second quarter of 2019 at 3.8 per cent

The report says that in Victoria, strong state government investment in education has boosted student intakes by 5.8 per cent per year from 2001 to 2017, exceeding the national average of 4.9 per cent and increasing its share of national enrolments by 2.2 percentage points.

Much of this growth is in the international student segment with Melbourne rated third globally in the 2019 QS Best Student Cities Ranking.

Such is the current demand, that education has become the ‘sleeping giant’ of office demand, said Darren Krakowiak, JLL’s Director of Tenant Representation. 

He said that students were now concerned with quality of life as much as their studies and that universities were responding while landlords were actively seeking education groups as tenants.

“Safety issues have focused attention on the need for students to be in highly connected environments,” Krakowiak said.

“The continued blurring of lines between work, learning and recreational time will continue to compel education groups to adapt and find new ways to appeal to prospective students.

“Education tenants are being sought after by landlords, also, because the sector has the capacity to absorb significant amounts of space in a single transaction, with strong covenants, and a lower propensity to move out.” 

JLL’s Senior Director Strategic Research Annabel McFarlane said that over the last five years the education sector accounted for 10.1 per cent of Melbourne CBD office space take-up, up from 2.2 per cent in the previous five years.

Examples of recent movements in the sector include Victoria University’s consolidation of its city campuses into City West Precinct, a 32-storey vertical campus due for completion late in 2021 and Monash College taking more than 40,000 square metres of space at 750 Collins Street, Docklands.
 
McFarlane said the activity was placing pressure on the Melbourne office market and that vacancy levels were close to a 30-year low in the second quarter of 2019 at 3.8 per cent.

“The activity is not limited to traditionally CBD-based education institutions such as the University of Melbourne and RMIT but also LaTrobe, Deakin and Monash,” she said.

“Five out of Victoria’s six largest universities by enrolments have taken space in the CBD since 2014.

“The influx of education tenants has added to downward pressure on CBD vacancy and has added weight to Melbourne’s centralisation story.  

“Melbourne’s status as a top-three global education destination creates more opportunities for investors looking to capitalise on further growth in this sector.” 

The JLL report also found that along with the increased demand for university premises, there had been huge growth in purpose-built student accommodation in the Melbourne CBD and that non-university education providers had become key sources of demand for space in secondary office buildings.

Click here to read the report Sleeping Giant

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