Why More Investors Are Discovering Student Housing
January 26, 2022 | Teddy Leatherman | Multi-Housing News
Last year proved to be one of the most active years for student housing investment activity, particularly over the third and fourth quarters of 2021. Based on current market activity and investor interest, 2022 is poised to be even stronger.
While the return of students to colleges and universities is providing a boost to the student housing sector, strong fundamentals and returns are playing a much greater role in this record-setting activity.
Prior to the pandemic, 2020 was expected to be one of the largest transaction years in history for student housing investment; however, COVID-19 sidelined much of the activity due, in part, to the fear that remote learning would negatively impact the sector. Despite the many obstacles, the asset class performed extremely well, as students opted to stay in on- and off-campus housing near friends, which kept rent collections high.
At the beginning of 2020, the cap rate spread between student housing and conventional multi-housing was about 25 basis points. By fourth quarter of that same year, the rate increased to roughly 80 basis points. Given that spread, student housing is not only garnering interest from traditional investment groups, but from new investor pools seeking to enter the market. These new entrants range from conventional multi-housing investors chasing yield to experienced commercial real estate investors who have historically focused on other product types and are now seeking an opportunity to invest here.
