As investors seek diversification and enhanced returns amid an evolving economic landscape, alternative sectors are coming into sharper focus.

Living sectors are gaining traction driven by Australia's structural demographic shifts - population growth of 1.2% is projected annually¹, aging demographics, and a housing supply shortfall exceeding 260,000 dwellings. Key subsectors showing momentum include purpose-built student accommodation (PBSA), seniors living, build-to-rent, affordable housing, and land subdivision. These sectors address critical social infrastructure needs while delivering inflation-linked income, portfolio diversification, and defensive characteristics that perform well across economic cycles.

The structural opportunity

The federal government's National Housing Accord targets 240,000 new homes per year until 2029, but forecasts point to a shortfall of more than 260,000 dwellings². With the residential market valued at over $11.2 trillion and supply at decade lows³, this significant gap is creating opportunities for platforms with the scale and capability to respond.

Demand is rising across all life stages, with pressure building at both ends of the housing spectrum. Australia already has 4.75 million people aged 65 and over - a figure expected to approach seven million by 2040. Meanwhile, the share of Australians with a bachelor's degree or higher has increased more than six-fold over the past two decades, with international student enrolments growing 15% between 2019 and 2024.

Purpose-built student accommodation: A supply-constrained market

PBSA represents just 6% of current student housing supply – or one bed for every 15 higher education students. Sydney and Melbourne alone face shortfalls of 25,000–30,000 and 15,000–20,000 beds respectively, with only 19,000 new beds forecast through to 2027⁴.

This supply-demand imbalance is driving compelling returns. According to research by Knight Frank, Studio rents have surged since 2018: up 50% in Sydney, 38% in Melbourne, 36% in Adelaide, and 28% in Brisbane. The sector recorded over $1.8 billion in transactions in 2025 alone, with stabilised assets trading at 5-5.5% yields and national average rental yields of 9.04% with 9.78% annual rental growth⁵.

PBSA's defensive characteristics include prepaid leasing structures aligned with academic calendars, providing predictable income streams. Demand typically rises during economic downturns as students defer entry into the workforce, creating a built-in counter-cyclical buffer.

Dexus is already the largest private owner of on-campus student accommodation in Australia⁶, partnering with leading institutions to deliver more than 7,000 beds across three major universities. As universities face funding pressure, they're increasingly turning to private capital, positioning experienced operators for growth.

Seniors living: Essential infrastructure with structural tailwinds

Seniors housing is the most established Living subsector, with around 430,000 places nationwide - four times the size of PBSA and 10 times that of build-to-rent⁷. However, only 12,000 new units are planned through to 2030⁸, while homeownership among older Australians is declining.

As an essential service, seniors housing benefits from steady demand, long residency periods, and income streams supported by superannuation and government subsidies. Yields range from below 5% for high-quality metro assets to over 9% for regional properties⁹, with the spread reflecting differences in asset condition, management models, and local market dynamics.

Scale and operational expertise are key differentiators in this sector, where quality of care and resident experience drive both occupancy and pricing power.

Our strategic approach

At Dexus, we're focused on operational Living sectors that are well-established overseas but still emerging in Australia. Our existing student accommodation platform gives us a foundation to scale in PBSA, while partnerships enable expansion into seniors living and other living subsectors. While build-to-sell remains opportunistic, these sectors offer compelling long-term potential through higher density development and ongoing revenue streams.

Through our Alternative Investment platform, we're deploying capital into opportunities that align with our core strengths: origination, development, investment and asset management, and placemaking. We're partnering with groups that bring deep residential expertise and delivery capability, combining our capital and platform strength with their local knowledge and execution.

A clear example is the investment by Dexus Real Estate Partnership 2, in partnership with Third.i, at Merewether Golf Course. This joint venture will deliver 180 premium seniors living apartments in Newcastle, which is an undersupplied market with strong demand for high-quality retirement living. Set within golf course grounds, the project integrates green space, amenity and urban infrastructure access, demonstrating our strategy of identifying opportunities with structural tailwinds and delivering enhanced returns where traditional capital may be constrained.

[1] Australian Bureau of Statistics

[2] National Housing Supply and Affordability Council (NHSAC) - 2025 State of the Housing System

[3] CBRE Pacific Market Outlook 2025

[4] CBRE Student Accommodation Report 2024

[5] Knight Frank Australia PBSA Update Q2 2025

[6] Savills Australian Student Accommodation report, 2024

[7] CBRE Australian Seniors Housing Report, 2024

[8] PwC and Property Council of Australia Retirement Living Census, 2024

[9] Real Capital Analytics, Sales and Market Research 2025