Education drives CBD office markets

Education drives CBD office marketsUnprecedented growth in international student numbers and the attendant booming apartment market is creating demand for secondary office space by education providers in Sydney and Melbourne, says Savills.Based on Australian Department of Education and Training data for the March quarter, student numbers are expected to reach a national record of about 660,000 by year’s end – a significant increase from the 630,000 students recorded in 2009.According to Savills, investment in development sites earmarked for the booming apartment market has withdrawn vast amounts of secondary office space, which was formerly available to education providers, from the market.Sydney and Melbourne have the lion’s share of international students (67 per cent combined), and their office markets are struggling to keep up with demand, says Savills.”Ultimately that situation is driving, and will continue to drive, a tighter office market overall as student numbers continue to rise and as stock continues to be withdrawn for other purposes,” says Mathew Kent, Savills’ divisional director in Melbourne.”At the moment we have multiple private [education] providers seeking space from 0 sqm to 2000 sqm,” he says, listing Study Group, Ozford College, CQU, Monash College, La Trobe University and Haileybury College among recent key education-sector lease transactions.”These transactions, along with current enquiry and confirmed requirements for up to 15,000 sqm, underline just how strong the market is and the confidence that key players have in where it’s heading,” he adds.Rob Dickins, Savills’ national head of Office Leasing in Sydney, says there has been significant take-up of B Grade space by education providers over the past 12 to 18 months, but it is difficult to quantify because so much space has been withdrawn. Education providers Navitas, The University of Newcastle, Bridge Business College and Kent Institute of Business and Technology have taken new space totalling up to 40,000 sqm in Sydney’s CBD in the past six months.”Given current enquiry levels, if an investor was to purchase a B Grade building in Sydney now, with the sole purpose of leasing space to education providers, they would fill it two or three times over,” Dickins says.”With student numbers on track to exceed previous records, there is little doubt that demand has yet to reach a peak, so we can expect further tightening of the market.”