It’s a Good Time to Build Student Housing; Here’s Why
University enrollment is projected to rise to about 12 million students over the next 10 years and student housing construction is not likely to keep pace with demand in the near term. It’s because of staggering stats like this that we’re excited to bring you the Bisnow Annual Student Housing summit on June 2 at The Rittenhouse Hotel in Philadelphia.
BASH keynote speaker, Reis chief economist and SVP Victor Calanog (here with NBA "no stats all star" Shane Battier re-creating the classic Arnold Schwarzenegger/Carl Weathers handshake from the movie Predator) tells us national vacancies for student housing properties stand at roughly 4.7%, only 50 basis points above the vacancy rate for apartments. Demand for student housing space is generally robust as enrollments increase nationwide. Approximately 11 million students are currently enrolled in a four-year institution, 8 million of those on a full-time basis. Both of those measures are historical highs for the US, Victor tells us.
Student housing is one of the most rapidly growing sectors of commercial real estate, Victor tells us. In 2014, student-housing investors bought between $2.8B and $3B in properties, while Freddie Mac transacted close to $1.3B in student housing loans. While the number of students enrolled in four-year institutions is projected to rise to about 12 million over the next 10 years, about 9 million of them will be full-time students in that same interval.
Student housing construction is not likely to keep pace with demand in the near term, Victor says. Over the next five years, the national vacancy rate is forecast to fall by 100 basis points to 3.7%. As a result, asking rent growth should average roughly 2.7% each year over the next five years. It should be on par with apartment rent growth, he says. Unsurprisingly, student housing clusters that can levy the highest rents tend to be associated with locations boasting expensive housing, Victor tells us. For example, the five most expensive schools as measured by rent by the unit are UC Berkeley, the University of Southern California, San Diego State, University of Pennsylvania and University of Denver. You can hear more from Victor when he speaks at the Bisnow Annual Student Housing summit on June 2 at The Rittenhouse Hotel in Philadelphia. Register now.