Schools Ripe for Student Housing Investors

May 1, 2018

Student housing has long been attractive to real estate investors. So where are developers adding the most inventory? Student housing developers aren’t branching out much, but instead are staying by larger universities they know can deliver. 

“Tier one markets continue to attract the most development and are still being targeted by the institutional capital that is pouring into the space,” Taylor Gunn, the student housing analytics lead for MPF Research, told the National Real Estate Investor. “Many of these schools are being targeted because of their enrollment growth, market fundamentals, or health of the state’s economy. We’re still seeing tier two and tier three universities being targeted, but not at the same volume.” 

According to MPF Research, the following five schools will open the most new beds in student housing by the start of the school year in the fall of 2018:

Florida State University: 2,700 beds

Florida State will be the busiest student housing market nationally in the fall of 2018 for new housing. “This is a market that looked good even through the recession,” says Jamie Swick, senior associate in the national student housing group for real estate services firm Colliers International.

Texas A&M University: 2,500 beds

Since 2011, developers have already added 16,500 student housing beds to the Texas A&M University, both on and off campus. That is higher than the increase in enrollment of 12,700 over that period, MPF notes. Off-campus inventory is expected to grow by another 6 percent by the fall of 2018. Properties have had to drop rents by an average of 6.7 percent due to competition from the new supply.

University of Central Florida: 1,500 beds

As of March, student housing properties near the university were 85 percent leased, which is an increase of nearly 11 percent from the year before. Rents are growing, too—average effective rents rose by 5.2 percent, which is more than any of the other top markets for development, MPF notes. 

University of Texas at Austin: 1,480 beds

Since 2012, about 6,181 new beds have been added, including the 1,480 projected to open in the fall. UT Austin, as well as Florida State, will likely continue to see development activity on the upswing next year too, Gunn says. 

Arizona State University: 1,480 beds

Developers continue to open new properties at Arizona State University. Since 2013, about 5,412 new beds have been added, including the 1,480 this year. 

Source: “A Look at the Most Active Markets for Student Housing Development,” National Real Estate Investor (April 30, 2018) and “Student Housing Performance Remains Stable,” (April 3, 2018)​