Last year, the focus of our blog series was commercial real estate in specific areas of the Mid-Atlantic region. We covered everything from Laurel, MD to Canton and Downtown Silver Spring on our “travels.” However, providing expert analyses of a wide range of property types is what Willowbrook Valuation does best. Now we pivot slightly to examine the outlook of growing industries like student housing.
As one might expect, the success of student housing depends on student demand and their continual interest in higher education. Judging by research by the U.S. Department of Education, that interest isn’t waning any time soon. By 2023, they project a 15% increase in enrollment, which is a total of 23.8 million students. Between 1990 and 2012, enrollment increased by 49% with an average annual increase of 3.3%. Today, students are taking longer to complete their degree programs, which bolsters the demand for housing.
While noting challenges such as the slowing annual growth rate (as younger generations are becoming wary of student loans) and the increasingly competitive online course market, revenue is still expected to rise to over $600 billion (at an annual rate of 1.7%) by 2027. This makes student housing a robust investment opportunity in 2023 and the years to come.
The Latest Trends in the Student Housing Industry
According to a recent Axiometrics report, the student housing market is characterized by these current trends:
- An increase in partnerships between public and private student housing. Two significant examples of this include the University of Kentucky and the University System of Georgia.
- More publicly traded student housing REITs (Real Estate Investment Trusts) are going private. Campus Crest Communities sold to Harrison Real Estate Capital, a privately owned firm, for $1.9 billion in 2016.
- High occupancy and prelease rates are drawing more investors. Between 2014 and 2015, student housing acquisitions increased by 50%. Every year, investors develop a better understanding of the student housing market. They’re also realizing just how lucrative the investment opportunity is, given the occupancy rates for housing near campus are particularly high.
- The supply of new beds has dropped, but this isn’t a bad thing. The number of beds delivered in the Fall of 2015 dropped to 47,000 compared to 63,000 the previous year. The supply of beds for students has caught up with demand.
Outlook for Student Housing
Student housing is a safe and dependable investment to make due to enduring demand. It’s also considered less risky than other assets, such as the broader multifamily market, which is often prone to more foreclosures, defaults and bankruptcies.
In the future, a growing college-aged population suggests a growing need for housing. As demand increases and more students hit the books, more inventory will be needed.
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