Institutional investors take aim at student housing

Student housing is an interesting niche market for real estate investors as it generally offers much higher returns. However, the downside is that student housing often requires more intensive management and administration.

Now though, institutional investors are entering the student housing game in order to benefit from those healthy returns.

Greystar has just announced a new $4.6 billion plan to buy the Education Realty Trust, which comprises a portfolio of more than 45,000 off-campus housing units at 47 universities in the U.S. Greystar will effectively become America’s second largest student housing provider once the deal goes through.

“Safety cannot be overlooked as a factor; student housing is generally a stable and recession-resilient asset,” Bob Faith, founder and CEO of Greystar Partners, told the CoStar Group. “The key is to construct a well-capitalized and well-located portfolio that can withstand the ebbs and flows of the market and choose universities that are competitive with growing enrollment.”

From an investor’s point of view, student housing has solid potential as it delivered steady returns during the Great Recession, Faith said. Moreover, he points to growing enrollment at big state universities across the country. In addition, student housing rents have generally been increasing as more facilities including rooftop pools, gyms and common areas are added.

“Whether you think of [student housing] as a safety net or not, every investor with a well-rounded portfolio is looking for something like this,” said Ryan Dennison, senior vice president for capital markets at American Campus Communities. “We focus on large universities, enrollment-based plays of 30,000–40,000 students.”

Student renters are going to be there “through thick and thin,” he adds.