College Housing Continues To Outshine Other CRE Sectors In 2023

One of the biggest surprises in commercial real estate in the past three years has been the resiliency of student housing. 

Most pandemic crystal ball users expected with colleges going to remote learning and students hunkering down at home that the sector would hit the skids. It didn’t happen for long. By the second half of 2021, vacancy rates started dropping and rent began to rise. Student rent rose nearly 5% in 2022, and with students eyeing another school season this fall, rent continues to escalate. 

Investment behemoth Blackstone Inc. last year paid $13 billion for American Campus Communities Inc., the largest student housing company in the U.S. That type of investment comes with rising rent expectations for the future, leading some students to shop for a spare bed instead of a spare apartment.

“This is a sector that we think has stood the test of time and is going to be a continued bright spot in the future,” said Jacob Werner, co-head of Americas acquisitions for Blackstone real estate. 

The Wall Street Journal (WSJ) this week opined that with office buildings sitting empty, apartment growth slowing and rents falling in 2023, college housing is a “rare bright spot in the beleaguered commercial real-estate business.”

The WSJ focused its analysis on “popular” universities, including top research schools and those in the five highest-earning football conferences, while smaller college enrollment continues to decline. 

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Despite a continued rise in mortgage rates, sales of student housing property reached a record high just south of $23 billion last year, according to CBRE. Real Page pegs student housing rent growing this year at nearly 9%. 

Werner said student population numbers don’t shift based on economic factors. “It’s an all-weather asset class. In good times, people go to school,” Werner said. “In bad times, more people tend to go to school.”

The WSJ wrote that sales of student-housing properties this year will likely not match 2022 levels because last year’s volume was partly the result of pent-up demand. That said, Muinzer, a privately held real estate investment firm founded by Marc Muinzer and T2 Capital Management, in June bought Village West near Purdue University in West Lafayette, Indiana, one of the largest student-housing assets in the nation with 1,134 beds on 22 acres of land. Village West is currently 100% preleased for August 2023 and the 2023-24 school year. The company started investing in student housing in 2002 and is among the largest owners in the Big Ten and the Southeastern conferences. 

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Muinzer Chief Operating Officer Michael Snyder said the company is far from finished with its acquisition goals. 

“Student-housing fundamentals are the strongest we have seen in the last 20 years,” he said. “In 2023 and 2024, we are looking to acquire an additional $1 billion of student-housing assets near high-growth areas.” 

Though student-housing values have dropped off this year, affected by higher interest rates, the decline has not been as sharp as other CRE sectors because of consistent rent growth and occupancy rates, according to CBRE national student-housing co-leader Jacklyn Fitts. 

“It’s performing differently than other asset classes in the market right now,” Fitts said.

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