Student housing, once an alternative asset type lying on the fringes of the commercial real estate spotlight, is gaining attention and breaking records.

Pre-leasing surged 7.1% in January, beating the peak it set last year at the same time. Leases signed at buildings still under construction climbed to a seasonal record high of 54.5% for the 2024-2025 academic year, according to a Yardi Matrix student housing report.

Twenty-two schools are already 75% pre-leased, with four of them above 90%, according to the Yardi 200, which measures the top 200 investment-grade universities across all major collegiate conferences.

Yardi attributed this increase to a rebound in enrollment. Undergraduate enrollment grew for the first time since the start of the pandemic for the fall 2023 term, rising 1.2%, according to the National Student Clearinghouse Research Center.

Pre-leasing percentages may rise even faster in years to come as new construction falls off. While 46,285 new beds are expected in 2024, a jump from 35,610 the previous year, supply will drop over the next five years to below the long-term average of 36,322 beds per year, Yardi concluded. The slowdown in supply is expected to offset a cooldown in demand and keep sector performance strong in 2024 and beyond, ULI predicted.

Asking rates for these beds are climbing as well, although by a smaller margin. In January, they went for $863 apiece, about a 0.1% increase from $858 in December. On a year-over-year basis, asking rates have jumped 4.9%.

While rent growth fell from 6.3% at this time last year to 4.4%, the sector remains solid, according to Yardi.

Student housing investment dropped off in 2023. Only 76 properties sold, down from about 205 between 2021 and 2022. When the Federal Reserve raised interest rates to curb inflation, student housing investors held on to their best assets in case of a sector cooldown.

The real cooldown, however, is in traditional multifamily, the crown jewel of the early pandemic. Because of rising labor, construction and interest costs slowing activity within the sector, investors are turning to alternative assets like student housing to close deals and garner a return, according to ULI's 2024 Emerging Trends Report.