College Tuition May Be Jumping, But Student Housing Continues To Be A Good Bet For Investors

U.S. college enrollment may have dropped by 3.1 million students, but that hasn’t stopped student housing investors from enjoying the fruits of a record-breaking performance in 2022. 

Rising tuition rates that increased revenue by $6.9 billion year over year may be one of the culprits of declining enrollment, according to My eLearning World. But according to property management software company Yardi, the third quarter was especially good for the student housing business. 

According to the latest Yardi Matrix report, over 200 U.S. universities saw student housing beds being occupied at a faster pace in 2022 compared to 2021. Preleasing at Yardi 200 universities concluded with a record percentage of bedrooms leased in September. Rent growth remained robust, while transaction activity remained elevated.

According to the MSCI World Real Estate Index, while commercial real estate sales have slowed amid the Federal Reserve’s aggressive interest rate hikes, student housing investment sales reached $18.2 billion through three quarters this year. The MSCI World Real Estate Index is a free float-adjusted market capitalization index that consists of large and mid-cap equity across 23 developed markets (DM) and tracks real estate deals of $2.5 million or more. Blackstone Inc.’s purchase of American Campus Communities Inc. accounted for $12.8 billion of that total. 

“We’re seeing some of the best operational success that I’ve ever seen, so there is still a lot of capital allocated to student housing. But more of it is moving to the sidelines,” Travis Prince, an executive managing director for Cushman & Wakefield PLC in Tampa, Florida, told Multi-Housing News. “Once we see a little stability return to the market, I think we’ll start to see trades again and more normalized activity.”

In October, Indiana-based development firms Harrison Street and Trinitas announced their move to develop four student housing communities at the universities of Georgia, Indiana, Central Florida and Wisconsin at a price of $450 million. 

But beyond the investment purchase number, Yardi reported the fall 2022 preleasing period closed with a record-breaking performance. As of September of this year, 96.6% of beds at universities followed by the company were preleased. 

The university with the most year-over-year growth (18.9%) was Washington State, followed by the University of Houston (16.4%). The University of South Alabama had the lowest percentage of bedrooms preleased, with an 80.6% rate. 

On the negative side, a few-thousand-bed decline compared to the previous quarter. Yardi reported that 130,000 bedrooms were in different stages of development as of September, with nearly 62,000 beds under construction. The University of Texas at Austin had the largest under-construction stock that month (5,315 beds), representing 10.5% of enrollment.

Start generating passive income through real estate

Check out these featured investments from Benzinga's Real Estate Offerings Screener.

Latest on Real Estate from Benzinga

• Rapidly Growing REIT Sustains 8% Dividend In Bear Market
• An Investment in This REIT 5 Years Ago Would Pay A 38% Dividend Yield Today
• Leveraging Dallas's Real Estate Market Boom with $250: How, Why And Why Now?