Student Housing: The Next Big Thing in CRE

While office buildings lie empty and multifamily apartment rentals fall, housing in some college markets may be the commercial real estate industry's shining star. 

CBRE data released by the Wall Street Journal shows that sales of student housing units hit a record $22.9 billion in 2022, driven by limited availability and high demand at popular U.S. colleges and institutions.

According to RealPage, in May 2023, the rent for student housing increased by 9 percent annually, while the rent for multi-family dwellings increased by only 2.3 percent.

Despite the fact that 2022 saw abnormally high levels of pent-up demand after the pandemic left campuses desolate, investors like Blackstone expect ongoing growth after purchasing American Campus Communities for $12.8 billion in 2018. 

The Journal reported comments from Blackstone's co-head of America's acquisitions, who argued that despite economic ups and downs, demand for housing for college students remains relatively stable. 

However, some industry experts claim that not all college rental markets are growing at the same rates. 

After the pandemic, there is less available accommodation for the expanding number of students attending colleges and institutions, many of which participate in lucrative sporting conferences and have well-regarded research programs. Sarah Lawrence College and the University of San Diego are just two examples of institutions that have been reported by The Real Deal to temporarily house their students in hotels due to a lack of adequate long-term housing. 

High borrowing rates pose a threat to new development and the resulting supply across all of commercial real estate, including this sector. The multifamily sector took a hit this year, with sales of apartments falling to a 14-year low due to factors such as flattening rents, economic uncertainty, and increased borrowing costs. 

Elisa Wilson, of JLL, told the Journal that the market for student housing after the pandemic is a "tale of two markets," but the company's data show that overall student housing is 70% preleased for Fall 2023, which is on par with May 2019 levels.