The Property Council of Australia has released a detailed paper on education property and precincts to help unlock the barriers to investment in education real estate portfolio worth $52B in New South Wales and inject cash flow into the sector.
Property Council's NSW Executive Director Luke Achterstraat said the report revealed how much asset growth potential there was within the education sector and the need to correct flawed and outdated operating models that have been further exposed by the pandemic.
"These models reflect the Federal funding environment which continues to shrink, forcing a dependency on international student income as well as a need to find alternate sources of funding," Mr Achterstraat said.
"That alternate source of funding could hide within the value of the NSW education sector's property portfolio greater than $52B, consisting of real estate assets that are primed for reapplication toward additional revenue generating ventures.
"If better leveraged to generate returns in line with the institutional real estate sector, the income growth for the sector could be exponential and the industry will not have to rely on outdated funding models.
"More broadly, the education sector contains a weighty asset portfolio, with the book value of the NSW Department of Education alone totalling $33B."
Mr Achterstraat said despite these hefty real estate portfolios, six out of ten NSW public universities reported an operating deficit in 2020 with a decline in net operating result of $396m since 2019 across all ten.
"This presents us with a significant opportunity to offset these losses by leveraging capital locked up in asset holdings while concurrently revitalising education precincts and to hone in on core business operations," he said.
"Co-investment in developments with the private sector can leverage the economic output of the innovation districts by combining the strengths of academia with commercialisation.
"But by innovating and actively managing their real estate portfolio, the real estate sector has outperformed universities in measures of revenue, asset performance and general fiscal prosperity."
Minister for Science, Innovation and Technology and Minister for Skills and Training Alister Henskens noted the way the education sector has worked together to find innovative solutions to the challenges before it.
"I have been struck, since coming into this portfolio, at the level of collaboration both across the educational and research sectors. The Property Council's paper identifies further opportunities for collaboration, growth, and the realisation of potential, and I commend it to you," Mr Henskens said.
Mr Achterstraat added now was the time for the property industry to bring their expertise and balance sheet to work with educational institutions for a mutually beneficial outcome.
"Students and their families and friends need somewhere to sleep, ways to get around, places to eat, work, shop, study and have fun. Increased foot traffic and beds associated with education assets bring life to the precincts and districts they inhabit and will continue to fuel placemaking and planning across the state."
