Student Housing Remains Resilient: Report

Cushman & Wakefield finds a shortage of 1 million beds in the sector as construction slows and Generation Z heads off to college.
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Cushman & Wakefield sees a 1 million bed deficit in the U.S. student housing market, as vacancies in privately owned properties hover just above all-time lows and universities brace themselves to accommodate Generation Z, an even larger cohort than the Millennials.

In a new report, the brokerage finds that rents for privately owned off-campus student housing have grown by 3.2 percent annually in the current economic cycle. Rent growth has cooled recently but is expected to pick up again, with fewer properties coming online in the wake of a construction boom that has tapered off since 2017.

Investors are hungry for student beds, despite a lull in 2019. Starting in 2011, transaction volume has surpassed $2.5 billion each year, peaking at $10.8 billion in 2018, and the report finds that investor interest remains elevated. The top third of higher education institutions have drawn the majority of deal activity, with large land-grant universities in the Sunbelt and Midwest historically pulling in the most capital.

Land-grand institutions such as Texas A&M University, the University of Arizona, the University of Kentucky and the University of Minnesota appeared on the list of top markets for student housing sales in recent years. Large cities with a variety of colleges and universities, such as New York City and Los Angeles, also appear near the top of the ranking for sales volume.

Overseas capital steps in

The report finds that despite the dominance of private capital as both a buyer and seller of student housing assets, institutional and foreign capital is acquiring a taste for university beds. Singapore’s Mapletree Investments and GIC, the Canada Pension Plan Investment Board (CPPIB) and Germany’s Allianz and HQ Capital have all made significant bets on the sector during the current cycle. At the same time, public vehicles have reduced their activity in the sector, a trend strengthened by Greystar Realty Partners taking Education Realty Trust (EdR) private last year.

Cushman & Wakefield argues for exposure to student housing assets as part of a diversified portfolio, citing continued demand for higher education that makes the asset class relatively resilient to a downturn.