Is Student Housing Ready to Bounce Back?
At the beginning of the pandemic, most real estate investors were anxious to see how COVID-19 would affect business. One sector in particular that was closely monitored was student housing. Off-campus housing property owners and managers not only had to comply with each states’ guidelines, but had to adapt accordingly to colleges and universities’ varying responses.
Investments into student housing had dropped 12% compared to pre-crisis levels and some estimates expected mixed results this fall.
However, while student housing was not immune to the impacts from COVID, the sector has presented several recession-resistant traits since March 2020. Student housing’s resiliency has shown it was able to keep pace with the traditional rental housing industry.
Student housing nationwide experienced only a 3% decline for Academic Year 2020-2021, which was recaptured and then some during the Academic Year 2021-2022. Collections were high, and actually outpaced traditional multifamily (which most industry observers agree was a stand-out from a pandemic performance perspective) by 200 to 300 basis points.
Why was this? According to a recent study from Pierce Education Properties, COVID-19 and Student Housing – Myths and Realities, “The method of course delivery had almost no impact on occupancy of off-campus housing, as students demonstrated a high propensity to return to college irrespective of course delivery method.”
Although this year began with a surge in COVID cases, the sector’s prospects are still promising, and investors are taking note.
Blackstone, the world’s largest real estate company, formed a $784 million joint venture with Landmark Properties to invest in eight student housing properties totaling 5,416 beds across the U.S. Encouraged by the ongoing favorable macro trends in the sector, Brookfield partnered with Scion to acquire a U.S. student housing portfolio of 27 properties with more than 17,000 beds in close proximity to large, public universities.
JLL senior director Stewart Hayes noted in a recent GlobeSt.com article that some of the new entrants are conventional multifamily investors and some are experienced commercial real estate investors who have historically focused on other product types but, because of how resilient student housing has proven to be historically, see this as an opportunity to invest.
Demographics are certainly favorable for the sector, and the institutional student housing market is poised to remain a steady option for real estate investors. In total, the U.S. student housing market across is expected to expand to 9.2 million beds by 2031, as opposed to its current 8.5 million beds. This is an average annual increase of 0.8 percent.
The sector did experience a flight to quality during the pandemic and investors were focused on core assets at Tier I universities. And while most markets recovered well as students returned to campuses, investors should continue to pay increased attention to the location of a student housing community and focus on markets in which there is a substantial growing student body and where the property is located in close proximity to the campus.
For apartment owners who are interested in participating in the growing demand for all types of multi-housing properties, but are ready to retire from being a landlord, there are passive real estate investments that may allow investors an ability to move from an active to a passive role of real estate ownership on a tax-deferred basis.
For more information about passive real estate investments, please call 1031 Capital Solutions at 1-800-445-5908 or visit our website, 1031capitalsolutions.com.
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 GlobeSt.com, Multifamily Investors Look to Student Housing as an Attractive Alternative, Nov. 12, 2021
 National Apartment Association, Student Housing Holds Strong During Pandemic, Oct. 2021
 RE Journals.com, Surge in Demand Propels Student Housing, Oct. 6, 2021
 Multihousing News, Student Housing in 2022 – What the Experts Expect, Jan. 5, 2022
 The Registry SF, Student Housing Demand Expected to Increase over Ten Year Period, Nov. 1, 2021
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