Student housing has become an increasingly popular real estate investment sector in recent years. With rising college enrollments and aging on-campus housing, off-campus purpose-built student housing communities are seeing huge demand and increased development. Investors big and small have taken notice, leading to billions in capital flooding into the student housing market. However, while the opportunities seem abundant, this emerging sector also poses unique risks that investors must consider.
Massive capital inflows driving competition and development
The student housing sector has seen over $45 billion invested just in the past few years. Major funds like Brookfield, GIC, and Tristan Capital have made big buys, while student housing REITs like ACC, EDR, and CCC are expanding their portfolios. Hundreds of thousands of new beds are being built annually, yet demand still outpaces supply. This flood of capital has intensified competition, with developers building ever more amenity-rich communities while cap rates remain higher than other property sectors.
Global rise in university enrollment fueling housing demand
The growth in student housing investment is underpinned by steady increases in college enrollment, especially from international students. Total enrollment at U.S. universities has risen by 6 million over the past 20 years. While on-campus housing supply has not kept pace, off-campus purpose-built communities are filling the gap. Key student housing markets like Boulder, Ames, Durham and more are essentially fully pre-leased before each term begins.
Premium rents for proximate, high-quality properties
Not all student housing assets offer the same opportunities. Investors must be selective in targeting communities near top universities and in undersupplied markets. Properties within 0.5 miles of campus command rents nearly 20% higher than those farther out. Newer communities with ample amenities can also charge premiums, as students accept higher rents for luxury, security and convenience.
Specialized operational expertise is essential
Unlike other real estate sectors, efficient operations and marketing are paramount in student housing. Investors must budget for continual upgrades and understand the unique rhythms of student customer demand. This specialized expertise poses a barrier to entry for less experienced investors, even amid intense capital competition.
The student housing sector provides abundant opportunities but also unique operational and market risks. Careful targeting of asset locations and universities is key, as is partnering with experienced managers. If these factors are addressed, the sector promises continued growth and strong risk-adjusted returns.