Student housing in the Sydney city fringe and why it is having its moment

As commercial real estate agents working across the Sydney city fringe, we are seeing a clear shift in how investors, developers and even owner occupiers are thinking about student housing. What was once a niche asset class is now very much in the mainstream, and recent planning decisions have only accelerated that momentum.

Perhaps the most telling example is the Central Station development. The much-publicised tech hub anchored by Atlassian was meant to be a flagship tech employment precinct. That vision has been modified, with student housing now forming part of the future mix. This change alone says a great deal about where demand really sits in inner Sydney.

Universities on the doorstep

The city fringe has always been tightly connected to higher education. Sydney University, UTS, Notre Dame University and satellite campuses for other institutions like Western Sydney and Torrens universities sit within walking distance or a short commute of suburbs like Ultimo, Chippendale, Glebe, Redfern, Darlington and Camperdown.

These locations tick every box students look for: close to lectures, transport and work opportunities and surrounded by food, culture and nightlife. From an accommodation perspective, they are hard to beat.

What has changed is the scale of demand and the shortage of appropriate supply.

Demand for student accommodation roared back faster than supply

International students have returned in force. Domestic enrolments remain strong. According to industry research, only a small fraction of students can access purpose-built student accommodation near campus. In Sydney, the shortfall runs into the tens of thousands of beds.

Even with new apartment developments coming online, supply simply has not kept pace with demand. This imbalance is a big reason student housing feels like it is having its moment. Occupancy levels are high, rental growth has been resilient and competition for well-located stock is intense.

The yields can be compelling

From an investment perspective, student housing is being recognised for its income profile. Purpose-built student accommodation in particular has been trading on net yields in the mid four to low five per cent range, while well-run co-living models can push higher, particularly where room-by-room leasing is permitted.

These returns often outperform standard residential yields in the same areas. That does not mean student housing is risk-free or suitable for everyone, but it does explain why investors are paying closer attention.

It is also worth noting that several recent sales in the city fringe have been underpinned by the potential for student accommodation use or conversion. In some cases, that future flexibility has been central to the price achieved. We believe it’s worthwhile for owners to ‘think outside the box’ when reviewing their property portfolio. Student accommodation isn’t the only game on the Sydney city fringe, either. As far back as June 2024, the University of Notre Dame sought planning permission to convert Chippendale offices into additional teaching space, supporting its Broadway campus and freeing up space in its Darlinghurst campus.

Why the city fringe works so well

Location is critical in student housing. Proximity to universities, public transport, the CBD and lifestyle amenities drives demand and supports rents.

The city fringe offers all of this in a compact footprint. A student living in Ultimo or Chippendale can walk to UTS, cycle to Sydney University and jump on a train at Central. That convenience is difficult to replicate further out.

For owners of older commercial buildings, boarding houses, smaller hotels or mixed-use assets, this raises an important question. Is the current use really the “highest and best use” anymore?

A moment to rethink strategy

One of the reasons we are writing about this again is that many current owners may be sitting on assets with untapped potential. Buildings that were once offices, light industrial spaces or even traditional residential stock might, subject to planning controls, be repositioned to meet student demand.

This does not automatically mean a conversion is the right move. Capital growth profiles, management intensity, planning risk and exit strategy all matter. Student-focused assets often appeal to a narrower buyer pool, which can affect long-term capital growth.

That said, for owners prioritising income, occupancy stability and resilience through economic cycles, student housing deserves serious consideration.

More than a passing trend

The shift at Central Station is symbolic. When a city and its investors choose to prioritise student accommodation over a global tech headquarters, it signals where sustained demand lies.

Universities are not moving. Student numbers are not shrinking and the city fringe remains the natural home for those students.

From our perspective, student housing is not a short-term play; it is a structural response to long-term demand. For investors and owners willing to look beyond traditional leasing models, there is a real opportunity in reassessing what their property could be.

If you own a building in the Sydney city fringe and have ever wondered whether it could work harder for you, now is a very good time to start that conversation.

As always, when considering an investment or strategy in property, you should take into account your financial circumstances and seek advice from your financial adviser before acting.

Let us help you with your Sydney city fringe commercial property

As dedicated local commercial real estate agents, we can help you extract more value from your commercial property. Please get in touch to discuss your circumstances and assets so we can give you personalised advice. Whether it’s commercial leasing, management or sales, we’re here to help you with your Sydney-based commercial property.

Contact us at Ray White Commercial Sydney City Fringe