Extended stay accommodation is gaining popularity.
Extended stay accommodation is emerging as one of Australia’s fastest growing property segments, providing an alternative option for investors struggling to make decent returns in the traditional rental market.
Until now, the property assets were largely the domain of corporate investors but Extended Stay Australasia (ESA) managing director Damian Gallace said the soaring price of mainstream housing was making extended stay accommodation increasingly attractive to mum and dad investors.
Mr Gallace said smaller investors could buy in to extended stay ventures at a similar cost to the current purchase price of many residential properties.
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Extended stay accommodation looks like apartment-style buildings when built.
Osborne, soon to be home to a state-of-the-art $30bn ship building yard for the AUKUS submarines, is among the locations for possible future accommodation. Picture: NCA NewsWire/Brenton Edwards
Once built, the apartment-style buildings were leased back to ESA, providing guaranteed rental returns without any ongoing maintenance or property management costs, Mr Gallace said.
Even if the accommodation sat empty for a period, investors still received a rental return, he said.
“This gives investors certainty of income and certainty their asset is being looked after by someone just as interested in their investment as they are,’’ Mr Gallace said.
“You don’t have to deal with the occupancy selection and you don’t have to deal with the end-of-rental period (and readvertise for new tenants).
“In a five-year period in a traditional rental, your rent could fluctuate five times because of five different tenants.
“With our accommodation, (the returns) have most likely gone up for every year of those five years.’’
Last year, a Future Market Insights report forecast Australia’s extended stay accommodation market would grow to be worth US$2.3bn over the next decade, reflecting a compound annual growth rate of five per cent.
The expansion would be fuelled by a shift in working patterns, the report said, with remote work and hybrid arrangements becoming more common.
Unlike traditional holiday apartments, extended stay accommodation is purpose-built for long term stays by corporate and government workers, with full-sized kitchens, bathrooms and laundries, as well as high-speed business-grade Wi-Fi and dedicated workspaces.
Mr Gallace said demand for extended stay accommodation assets was currently outpaced by demand.
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Whyalla, where the current Magnetite expansion program is set to create hundreds of jobs, is also a possible site for accommodation. Picture: Brett Hartwig
Real Estate Institute of South Australia chief executive Andrea Heading. Picture: Supplied
Osborne, soon to be home to a state-of-the-art $30bn ship building yard for the AUKUS submarines, and Whyalla, where the current Magnetite expansion program is set to create hundreds of jobs, are among the locations for possible future accommodation.
The Eyre Peninsula was another potential location if the state government’s proposed $5bn Northern Water desalination plant proceeds.
Further afield, projects in Far North Queensland, including the Mourilyan Silica Sands mine, near Innisfail, could also benefit from extended stay accommodation.
Mr Gallace said corporates preferred to use extended stay accommodation for workers rather than traditional rental options due to the consistency and quality of the accommodation and the lack of fixed periods for tenancy.
Real Estate Institute of South Australia chief executive Andrea Heading said the property offerings could help solve accommodation shortages in areas that relied on FIFO
employees or in places like Kangaroo Island, which suffered from a lack of housing for seasonal workers during peak holiday periods.
“With more people coming in (to South Australia), with say (work in) Defence and AUKUS in particular, there will be a big need for more of this,’’ Ms Heading said.
However, she said securing land to build any form of housing or accommodation could be difficult.
– by Lauren Ahwan
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