Student Housing Emerges as Boon for Investors

August 3, 2017

Investors are increasingly turning their attention to student housing. The investment volume in student housing in 2016 jumped 64.5 percent year over year, compared to a 4.3 percent overall increase in the multifamily sector.

Student housing still remains a relatively small portion of the multifamily sector, however. Student housing comprised 6.6 percent of total multifamily transaction volumes in 2016. But it’s soaring to record levels: In 2016, student housing hit a record of $9.2 billion in activity, National Real Estate Investor reports.

Why is student housing booming? Millennials are the nation’s largest generation and university enrollment has increased to more than 4.3 million. Enrollment figures are expected to increase in 2017 and 2018 too, with the addition of 100,000 more students in that period alone.

The supply of student housing still needs to catch up. In 2016, 47,000 beds were delivered and an additional 43,800 beds are projected to be delivered in 2017. But that is down from annual deliveries of more than 60,000 in 2013 and 2014.

“Consistent demand, stable net operating income and a favorable supply environment will continue to attract investors to student housing,” National Real Estate Investor reports. “College-age population growth and subsequent enrollments are expected to remain positive in coming years and balanced with larger labor market trends. However, there is reason to be cautious. As investor interest in the sector has increased, pricing has become competitive. Additionally, student housing affordability, the value of education and student debt have the potential to mute demand in some markets.”

Source: “Why Student Housing Is Piquing Institutional Interest,” National Real Estate Investor (July 28, 2017)