Student Housing Is All 'More' Now
With unprecedented college enrollment, investors and developers are seeing huge opportunities in student housing. At this year's BASH (Bisnow's annual student housing event), six expert panelists discussed what is required to stay on top of student housing now that it has become the asset class that investors definitely want in their portfolio.
Our demand drivers and target markets panelists were Landmark Properties CEO Wes Rogers, The Priess Co CEO Donna Priess, CA Ventures SVP of investments John Diedrich, Campus Advantage SVP of investments Michael Orsak, Core Spaces managing partner Marc Lifshin and Harrison Street VP Justin Gronlie.
Moderator Peter Katz got the party started by giving a very positive overview of the “hottest sector in real estate.” There are more than 20 million students enrolled in colleges and universities, and that number is forecast to increase to 24 million by the end of 2021. Some of that growth comes from a record number of international students. The four countries sending the most students to the US for a good education are China, India, Brazil and Saudi Arabia.
Because of the huge number of potential customers, there is an unprecedented opportunity for private off-campus housing with excellent amenities.
Some of the growth is people moving into purpose-built housing as it becomes available for the first time.
Student housing is experiencing intense demand from investors. Peter told the 475-strong crowd that in 2015, there was $5.4B in investor sales, and this year it's expected to be north of $7B. This market, Peter said, is “all pulp, no seeds.”
All six panelists saw strong year-over-year rent growth—around 3%. Campus Advantage was the outlier with 4.2% rent growth. And pre-leasing occupancy is just as strong—most of the projects had between 70% and 90% occupancy before the doors even opened.
What's contributing to that hold-on-to-your-hat growth? Wes pointed to the risk-adjusted returns that student housing provides. Even during the recession, rents climbed as well as NOI—the only multifamily asset class to do so. That safe and steady 3% can be mighty tempting in a topsy-turvy market.
Donna told the crowd that 258,000 new students show up to college every year, and that is drawing a lot of foreign investment. Her company has closed eight deals this year and six were with international companies. John has also seen an increase in new international investors.
Keeping up with all that growth takes investment in people, Donna said. She’s poured capital into her infrastructure and talent.
Michael said the sales center and clubhouse were major drivers in his company’s rent growth.
There is so much more money coming into the market now that had never been for student housing before, Marc told the crowd. Of course, competition for that money is fierce, but it has been great for Core Spaces.
Justin notes the sophistication of the entire market has been ratcheted up in the last five years. Another difference? Every time he thinks we’ve reached “peak amenity,” someone throws a lazy river on the roof of a building and proves him wrong.