As students return to educational institutions across the United States, the demand for student housing is increasing, presenting new opportunities for investors. However, varying market conditions across different universities are leading to a fragmented landscape. Some universities are experiencing high occupancy rates alongside a shortage of available housing, while others face an oversupply with declining demand.
According to Yardi Matrix, a major player in student housing analytics, pre-leasing for the Yardi 200 — a selection of key student housing markets — reached 89.1% in July, marking an increase from 88.1% in the same month last year. This figure, however, is still slightly below August 2022 levels of 89.9%. Notably, 117 of the 200 markets surveyed demonstrated pre-leasing levels at or above those of the previous year. Tyson Huebner, director of research at Yardi Matrix, noted that new housing supply is increasingly concentrated in larger markets, adversely affecting performance metrics for institutions with the highest number of beds.
Harrison Street Asset Management, a prominent investor in student housing, has managed over $24 billion in assets encompassing 432 properties since its inception in 2005. Mike Gordon, the firm’s global chief investment officer, expressed a strong belief in the sector, though he acknowledged that specific markets vary significantly. He emphasized the importance of specialization in student housing investment, particularly as university markets continue to evolve due to changes in funding, enrollment levels, and student preferences.
Gordon pointed out that many leading institutions are experiencing a gap between enrollment growth and housing supply, especially at universities like Virginia Tech and Auburn. He likened thriving university towns to factory towns, where the institution serves as a source of intellectual capital, attracting not only students but also faculty and businesses seeking proximity to academic resources.
Why this story matters: The dynamics of student housing investment reveal varying risks and opportunities across different markets.
Key takeaway: Specialized knowledge in specific university markets is crucial for successful investment in the student housing sector.
Opposing viewpoint: Some analysts caution that the growing concentration of investment in large markets may overlook opportunities in smaller, potentially undervalued university towns.
