NMHC Special Report: Surveying a Strong Student Housing Market

The market has its hurdles, but smart investments and developments are still possible experts said at the annual event.

Panelists speaking at the first day of the National Multifamily Housing Council’s 2024 Student Housing conference took stock of the industry’s relatively strong performance in the face of persistent economic headwinds.

While fundamentals around occupancy, rent growth and transactions have posted declines through 2024, record freshman enrollment numbers at some of the nation’s largest universities as well as interest from many mainstream capital sources have made student housing a persistently strong asset class.

A recession-proof asset class?

During an executive panel at the Las Vegas conference the general consensus among some of the nation’s top student housing developers was that 2024 is a continuation of consistently strong performance for student housing, albeit a diminished one.

According to Yardi Matrix’s September Student Housing report, the average 92.9 percent preleasing rate at 200 surveyed universities lies 20 basis points ahead of 2023. Yet, the rent growth rate of 7 percent earlier this year has come down to 4 percent as of August. The incoming supply of 41,432 beds marks a 5 percent year-over-year decrease.

Alongside these structural trends, a delay in the Free Application for Federal Student Aid system earlier this year saw completions and qualifications fall by 11.6 percent, further impacting enrollment from economically disadvantaged postsecondary students. Some panelists even chalked some of the slumped fundamentals up to the grant system’s snafu.

“Enrollment dips were unprecedented and were hard to understand, which we changed to FAFSA issues,” recounted Robert Palleschi, CEO of American Campus Communities.

Still, the panelists were largely optimistic about longer-term fundamentals. “With all the things working against us in the economy at large, we are still getting high occupancies and 7 percent rent growth,” detailed Alex O’Brien, CEO of the Cardinal Group of Companies. “Multiple years with high single digit rent growth would be considered the golden era of student housing.”

The key to reaping these benefits is sound, accurate market research, alongside a tempering of expectations relative to location, supply, demand and demographics, according to Cliff Chandler, a senior managing director at Greystar. “As long as you are doing your analysis, picking the right markets and locations, there could be a couple of really strong years ahead,” he said.

One thing working in most developers’ favor? The virtual non-existence of oversupply, largely due to higher construction costs and higher rents. “If you look across the entire sector, we are not oversupplied conventionally,” Chandler noted.

But simply building more housing will not automatically guarantee the arrival of students seeking to live comfortably off campus. For Avi Lewittes, chief investment officer at The Scion Group, “it’s not as much about affordability as it is about appropriateness,” in terms of price, size and location relative to campus.

Of course, answers to the above often differ down to the developer. At Landmark Properties, for instance, the average annual income of a guarantor is $375,000, which has increased by $175,000 over the past seven years. And what is this affluent cohort looking for?

“They’re looking for the safest place proximate to campus without a car, and there is a premium that they are willing to pay for that,” explained Wes Rogers, the firm’s founder & CEO.


READ ALSO: How Well-Organized Living Spaces Can Boost Students’ Success


One area where development makes less sense, however, is for smaller universities with slowing enrollment.

“It’s hard to see a true course correction and a lot of the money is going to the largest universities that are continuing to get bigger,” said Charlie Matthews, CollegeHouse’s chief growth officer at a market performance and outlook panel discussion. “The enrollment cliff is true for smaller universities. Ultimately, I don’t see many people whose callsigns are for tier 3 to 4 universities.”

Be mindful of your surroundings

Still, Landmark’s recent developments and targeted demographics may not make the most sense for other stakeholders. For some, making beds as affordable as possible does right by more cost-conscious families and students and exists as a healthier investment, given the supply-demand imbalance’s impact on rents. Here, buying an older property for a value-add could be the winning strategy.

“It’s buying those assets, injecting capital and closing both the quality and rent cap so that there is a more affordable option for those families and students,” according to Chandler.

Affordability, in turn, can influence where students actually choose to live. “We see students living 20 minutes away because they can save $300 to $400 a month,” Matthews said.

But both building or renovating may be easier said than done given a lack of enthusiasm on part of state university systems to actually build more housing.

“Drivers to those schools are where universities want to spend their money,” according to Brendan Miller, chief investment officer at Core Spaces. Couple this with high interest rates and recent labor union strikes and developing in urban markets can often become cost-prohibitive.

One remedy for these challenges could be investments from non-traditional investors, many of whom “want to have long-term relationships,” and can deploy $200 to $300 million at a time, according to Rogers. Even if investments like these are better geared toward stabilized acquisitions, Lewittes is holding out hope, as the asset classes’ strong performance continues to attract new investors at a time when private ones make up the largest share of capital providers.

Now, it’s a matter of surviving until 2025. ”What we are waiting for is this better structured and better priced capital becoming unleashed over the next 12 to 18 months,” Lewittes concluded.

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