Student housing holds promise for CRE

While office spaces sit empty and multifamily apartment rents slow, housing in some college markets could be the star student for commercial real estate. 

Limited supply and high demand at popular U.S. colleges and universities are fueling sales of student housing properties, which reached a record $22.9 billion in 2022, according to CBRE data reported by the Wall Street Journal.

Student housing rent spiked with a 9 percent year-over-year increase in May 2023, compared to a 2.3 percent increase in multifamily rents over the same period, RealPage said.

Though 2022 saw atypical levels of pent-up demand after the pandemic left campuses deserted, investors like Blackstone are envisioning continued growth, given its $12.8 billion acquisition of American Campus Communities last year. 

Blackstone’s co-head of Americas acquisitions told the Journal that demand for college student housing isn’t usually susceptible to major economic fluctuations as people go to school throughout economic ups and downs. 

But not every college rental market is experiencing the same growth spurts, some analysts say. 

A growing number of students at schools with increasing enrollment — which include universities with high-earning athletic conferences and revered research programs — face a dwindling housing supply following the pandemic. Some schools with insufficient long-term housing supply, like Sarah Lawrence College and the University of San Diego, put up students in hotel rooms as a short-term solution, The Real Deal previously reported. 

The sector is in good company with the rest of commercial real estate, facing the risk of high interest rates limiting the amount of new construction and subsequent supply. Flattening rents, economic uncertainty and elevated borrowing costs hit the multifamily market earlier this year, when nationwide apartment sales hit a 14-year low. 

Though post-pandemic student housing is a “tale of two markets,” JLL’s Elsa Wilson told the Journal, data from the firm show overall student housing is 70 percent preleased for fall 2023, similar to May 2019 levels. 

— Nicole Rosenthal