Investment in residential alternatives of all types is rising, with big-ticket global residential investment volumes exceeding all retail or industrial investment in the past year, according to new research from Savills.

The latest Global Living report reveals that student housing investment volumes have risen 87 percent in the past five years, with the provision of Purpose-Built Student Accommodation (PBSA) highest in the UK and lowest in southern Europe.

Savills Director for Student Accommodation, Conal Newland, said that the supply of new PBSA in Australia was growing in many of the major cities, underpinned by a lack of existing accommodation and strong student population growth.

“As the 20- to 39-year-old age bracket becomes more prevalent in the rental market, the increasing influence of Gen Y’s demand for higher-quality rental accommodation is creating opportunities for developers to provide hybrid co-living developments,” he said.

“The recently completed UKO Stanmore is an example of a communal accommodation option available in Sydney, which has been delivered under the new generation boarding house planning designation.”

UKO is Australia’s first co-living residential series emulating similar concepts in Europe, the UK and the US, with its Stanmore offering comprising 33 units. Developments in Newton and Paddington are set to follow.

In Melbourne, there is Urban Coup, which comprises 30 households ranging from first-home buyers to young families.

Mr Newland went on to say he expected “a steady increase” in PBSA transactions in the short term, which he believed would be the catalyst for a surge of investment into other residential-based asset classes.

“Increasing transaction volumes will, in our opinion, drive down PBSA yields in Australia, which currently sit much higher than other more mature markets, such as the UK and many European countries,” he said.

The report outlines the growing popularity of co-living across the globe, which is a more luxurious form of share-housing and extends the convenience and amenity of PBSA to non-student markets. Targeted at graduates and young professionals, as well as students, co-living accommodation offers fully furnished units, extensive amenities, community events, all-inclusive bills and pro-active management.

“To make co-living work in many markets, it needs to be dense in order to compete on value with build-to-sell,” Mr Newland said.

“There are particular planning implications for this, and authorities need to recognise the trade-off between smaller units and larger communal spaces.

“For investors, the advantage is a diversified tenant base, not solely reliant on students and the success of the local higher education market.”

Mr Newland likened co-living to co-working, which was established in the office sector in response to occupier demand, and is now exceedingly popular.

“Co-living is emerging to meet current-day residential occupier requirements, and as the boundary between living and working becomes ever more blurred, we can expect to see greater integration of the two in future,” he said.

The report highlights WeLive, a co-living derivative of the WeWork shared workspace group.

“Given the increasing global capital flows attracted to a growing range of residential investment opportunities, Australian lawmakers should be mindful of passing legislation that may reduce the attractiveness of investments, or this country may run the risk of becoming less attractive to millennials and Gen Zs looking to study, live and work here,” Mr Newland said.