Student housing has bright future

Illustration of Phase 2 of student housing at Shippensburg University in Pennsylvania. Image courtesy of Campus Apartments

Illustration of Phase 2 of student housing at Shippensburg University in Pennsylvania. Image courtesy of Campus Apartments.

BIZMOLOGY — College move-in day is around the corner and the student housing sector is more eager than ever for the new school year to begin.

Student housing is a hot property type in many markets around the US, according to National Real Estate Investor. Commercial real estate investors, brokerages, and property managers are benefiting from a growing student population and pent-up demand for luxury off-campus accommodations.

Real estate companies such as Colliers International recently have expanded their student housing operations. Other companies deal solely in student housing. Campus Apartments specializes in student housing, and with some 32,000 beds under management, it is one of the largest property management companies of its kind. Favorable market conditions make the sector attractive to both institutional and private investors looking to invest in properties near college and university campuses.

Student housing proved to be resilient through the recession, and most communities experienced better than average rent growth and occupancy rates. This was the result of more people going back to school, or staying in school longer to receive advanced degrees in order to help employment prospects.

Student housing continues to attract investors since demand for the product appears to be unwavering. College enrollment in the US is expected to grow 1.5 percent a year during the next decade. Increased enrollment and decreased funding for on-campus housing construction have led to an eruption in development of off-campus student housing. More universities also are opting to outsource its on-campus housing portfolio to private real estate companies.

Some 50,000 new student-housing beds are expected to hit the market this year, according to AxioMetrics. The influx of supply will help keep rent rates down. However, rents are expected to climb in the next few years as new supply tapers off. Rising construction costs and labor shortages also are expected to limit new construction and impact supply.

While big university towns are ripe with opportunities, other markets for growth include communities with smaller universities and colleges. As students search for lower tuition and costs, they are opting to attend non-flagship schools.

Students also are hungry for new, modern living spaces that have a certain cool factor. As more student housing properties are developed in key growth markets, trends to be aware of include robust Internet connection capabilities and other upscale amenities. Many complexes feature resort-style pools, social and study lounges, wellness centers, and outdoor recreational activities. It’s definitely not the run-down dorm-living-type accommodations of the past.

Laura Huchzermeyer

Laura Huchzermeyer is an industry editor for First Research at Hoover's. She keeps a watchful eye on the financial services, construction, and real estate industries. Follow her on Twitter.

Read more articles by Laura Huchzermeyer.

Comments

  1. Having just dropped a daughter off at college I can attest to the boom in student housing. Many of the dorms (and academic buildings) at her university were either recently remodeled or in the process of being renovated. The facilities are amazing. And this at a state school — not even a wealthy bastion of elitism! It’s enough to make a parent want to return to college!! Instead we get to pay for it.

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