Student housing has become one of the hottest sectors in real estate, with $2.6 billion worth of capital pouring into the segment in quarter one of this year, pushing sales volume up 66.2 percent year-over-year, according to data from real estate services firm JLL.
“We are seeing more direct deals by foreign investors this year,” said Lucy Fletcher, a managing director and international capital expert at JLL. She noted that around half of all sales volume – around $1.4 billion – came from foreign investors.
Also rising in popularity are land lease agreements on campuses that have previously been vacant, or currently need repositioning, further adding to the boom, said National Real Estate Investor.
“Investors are buying into really well-managed platforms. There is large pent-up demand across the entire sector of core products,” explained Scott Streiff, JLL executive vice president. Streiff defined “well-managed platforms” as Class-A products which have enrollment of 30,000 students or more.
“We are seeing investors chasing core products that deliver attractive cap rates with projected student enrollment increases.”
One positive aspect of the student housing segment is that it’s particularly resistant to economic recession, which means many investors see it as a safe-haven compared to other real estate investment classes.
The market isn’t likely to slow down anytime soon either. Student housing broke new records in the 2014-15 academic year, with about 60,000 new beds being added, according to data from real estate services firm CBRE. CBRE further predicts that another 45,000 new student housing beds will be added in 2016-17.
“There will continue to be investment opportunities in 2017 and 2018,” Jaclyn Fitts, national director of student housing at CBRE, 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.”