The Real Deal New York

Will the student housing boom last?

The industry is facing demographic and economic pressures
August 15, 2018 08:00AM

Clockwise from top left: The London in College Station, Texas, The Crimson in Tuscaloosa, Alabama, The Ivy in Tampa, Florida, and The Harrison in Harrisonburg, Virginia (Credit: CLS Living)

As more investors have funded housing near universities, overbuilding has been a danger for some property owners. Investors are being more cautious as some backers have seen their bonds downgraded.

Real estate fund managers raised $1.9 billion, through July, for student housing projects globally, the same amount as they raised in all of 2017, according to a report in Bloomberg.

Portfolios are trading at high prices, too. As a part of Greystar Real Estate’s $3.2 billion purchase of Education Realty Trust in June, the company formed a joint venture with the Blackstone Group to buy some off-campus locations for another $1.2 billion.

At the same time, existing portfolios are commanding steep prices. The influx of money has divided the market in two: areas where supply is tight and others where it’s excessive.

Student housing also faces unique pressures. For example, there’s much more turnover among tenants, so landlords have to constantly fill units. Robert Bronstein — president and co-founder of Scion Group, which owns more than 60,000 beds nationally — likened it to selling cruise tickets.

“Once you leave the dock, if you haven’t sold the room, you’re not going to,” he told Bloomberg.

Demographics are changing, too. As millennials age out of their college years, analysts warn demand could drop. [Bloomberg] — Meenal Vamburkar