Student Housing Is Booming

DAILY REAL ESTATE NEWS | WEDNESDAY, JULY 13, 2016

The student-housing sector is reaching new highs. In the first quarter of this year, capital pouring into student housing reached a record $2.6 billion, according to commercial real estate services firm JLL. Sales volume for the student-housing sector was up 66.2 percent year-over-year.

"We are seeing more direct deals by foreign investors this year," says Lucy Fletcher, a managing director and international capital expert at JLL. About half of the volume — or $1.4 billion — came from offshore investors, Fletcher says.

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Land lease agreements are also growing in popularity for campuses that need repositioning or that have been vacant, adding fuel to the boom, the National Real Estate Investor reports.

"Investors are buying into really well-managed platforms. There is large pent-up demand across the entire sector of core products," says Scott Streiff, JLL executive vice president. Class-A products are deemed as those having enrollment of 30,000 students or more. "We are seeing investors chasing core products that deliver attractive cap rates with projected student enrollment increases."

The student-housing sector tends to be recession-proof, and investors are viewing it as safer than some other investment classes. "I don't know if there will ever be a point of supply and demand meeting in this sector," adds Jaclyn Fitts, national director of student housing at real estate services firm CBRE.

Student housing reached a new record in the 2014-15 academic year, adding about 60,000 beds, according to CBRE data. CBRE predicts another 45,000 student-housing beds will be added in 2016-17.

"There will continue to be investment opportunities in 2017 and 2018," Fitts told the National Real Estate Investor. "We will continue to see new development in 2017. Additionally, purpose-built student housing properties completed in the 2000s are primed for repositioning, so we will continue to see opportunity there in rehabbing first-generation purpose-built [properties] and raising rents."

Source: “Student Housing Sector Continues to Outperform,” National Real Estate Investor (July 12, 2016)