A substantial amount of office stock in Melbourne’s inner city is being withdrawn to make way for student accommodation as the state prepares for a flood of international students.
From 2015 to 2016, the number of international students enrolled in Victorian universities jumped by 13 per cent, breaking the record set in 2009.
“Given the falling Australian dollar, increasing number of overseas student enrolments and chronic shortage of suitable purpose built supply; a number of offices have been purchased for student accommodation redevelopment,” said Knight Frank director, Danny Clark.
Both a UK-based student living provider and a local provider have snapped up addresses in Melbourne’s CBD with a plan to develop them into student accommodation.
The current quantity of student apartments, according to City of Melbourne data, is 5,800 and that figure is expected to jump by 50 per cent over the next two years.
Mr Clark said that having previously witnessed the redevelopment of largely secondary offices in the late 1990s through the implementation of ‘Postcode 3000’, the CBD is once again the epicentre of apartment supply in the inner Melbourne region.
There’s also been a boost in short-term let stock, according to the Australian Bureau of Statistics, 693,200 short-term visitors arrived in June 2016, the largest one-month total on record.
“Despite new supply of inner city apartment development running double the long-term average, somewhat surprisingly, the residential vacancy level of the Inner Melbourne precinct fell over the last year,” said Mr Clark.
“The vast majority of offices being withdrawn between 2016 and 2019 will be redeveloped (97 per cent) compared to conversion (3 per cent). All of those offices identified for conversion are located within the CBD office market,” he said.
A further 211,519 square metres of office space across the CBD, St Kilda Road, Southbank and Suburban office markets has been identified for potential conversion or redevelopment, mostly into residential apartment space.