Student Housing

Just as industry experts thought the interest in student housing may begin to plateau, the prospects for growth are shining brighter.

Investors made $1.1 billion in student housing property transactions in the first quarter of 2017, reports CRBE. This figure excludes portfolio deals, which held their own: Q1 ended with the sale of a $1.6 billion portfolio, which is a great start to the year.

Local and foreign investors are showing confidence in the student housing sector. Student housing is histStudent Housing Showing Steamorically more stable throughout economic fluctuations. There are fewer enrollment surges during times of prosperity and fewer dips in enrollment during challenging times, reports TH Real Estate.

Tom Park, Senior Director, Strategy & Research at TH Real Estate, explains: “Rental growth in the sector has proven to be less volatile than that of conventional apartments – partially as a result of the sector being less economically sensitive. Results for some of the largest players in the market show rental growth volatility, as indicated by the standard deviation, was lower than conventional apartments and capital expenditures are in line with those of conventional apartment.”

College enrollments have continued to rise since 2008. Most notably, 2014 ushered in $3.5 billion in sales, topped in 2015 with $6 billion and $10 billion in 2016. The consistent growth contributes to the perception that student housing is a recession-resistance sector.

Enrollment in and applications for post-graduate programs are also rising. TH Real Estate estimates that about 3 million students enrolled in post-graduated programs in fall 2016. That figure has consistently risen since 2010 when enrollments maxed at about 2.2 million. Post-graduate studies will extend the demand for student housing

Though enrollments continue to grow, state budgets for education are shrinking. Public colleges and universities seek out institutional investors and developers for support.  The latter readily respond to the call.

“Interest in student housing has been growing steadily, as more investors look towards less traditional asset classes within commercial real estate. Much more institutional capital has entered the student housing space as of late,” Ethan Vaisman, real estate economist with research firm CoStar, said to NREI in a recent interview.

Market analysis by TH Real Estate forecasts that 2017 will be on par with last year’s success, which ended with nearly $10 billion in transactions by institutional investors and developers. Bids for assets are at a steady clip with no signs of slowing down.

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AUTHOR

Erica Rascón specializes in online content creation and social media. She joined Yardi in 2011 after receiving her bachelor's degree from Kennesaw State University and serving in the Peace Corps. Erica's interests include sustainability, philanthropy, and the arts.

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