Every fall, more than twenty million students tend to attend universities and colleges across the United States. The question of where these individuals would live through the duration of their academic program often poses an important opportunity for the investors, especially the ones who are sensitive to volatility during economic downturns. Today student housing is considered to be a recession-resilient real estate investment as during any economic downturn, most people decide to pursue further educations and enrollment trends remain strong. There are many reliable companies that have made their presence felt in the student housing real estate sector, Nelson Partners being one of them.
Enrollment trends are the key driver and metric that influences student housing investments. Traditionally, most student housing investors used to be attracted to Tier 1 markets that were defined as universities having more than twenty thousand full-time students. However, the recent demands and surging enrollment growth in Tier 2 and Tier 3 markets have not gone unnoticed, and both of them are now considered to be viable opportunities for student housing investors and developers. Even though student housing was considered a “niche” asset class for several years, with time this industry has become a lot more institutionalized. Today it boasts of having two publicly traded REITs creating interest from a broad spectrum of investors. The student housing industry manages to magnetize increased equity, as well as a wide array of diversified investors. They additionally play a key role in driving property value up, while pushing cap rates down. As the industry has managed to mature, the domain of student housing has magnetized a lot more cross-border investors. This group has in fact being responsible for almost a quarter of student housing transactions in 2016. Such trends strengthen the options of the investors upon disposition, and people can expect that cross-border investors shall continue to increase their activity in the space.
Purpose-built student housing came into focus sometime in the early 1990s. This basically implies to the fact that as these buildings age, they can actually become a good candidate for value creation. As the pool of student housing investors ultimately becomes more diverse, there would be a greater number of people seeking opportunities for value creation when it comes to their properties. By making consistent improvements, a lot of investors successfully increase their rents, and invariably their net operating income. They also get the opportunity to realize higher returns at a faster rate as opposed to the acquisition of stabilized assets.
University enrollment is consistently increasing in the United States and this trend is expected to remain the same in the coming years as well. This bodes well when it comes to sustained demand for student housing across the nation, as well as further opportunities for investors. A lot of renowned names have entered this space over the years, such as Nelson Partners.