Investors returning to resurgent, resilient student housing segment

With many students back on campus for the return of in-person learning at many colleges and universities, student housing is attracting many investors, both old and new, according to Jones Lang Lasalle (JLL).

The company’s data put transaction volume in student housing at $2.5 billion during the first half of the year, up from $1.7 billion during 2020’s first six months and closer to the roughly $3 billion seen in the first half of 2019.

Investors have been impressed with the subsector’s resilience during the pandemic, per JLL. In the opening stages of the COVID-19 crisis, the rise of remote learning stoked investor concerns that housing demand would plunge. But as it turned out, many decided to stay in student housing while taking their classes online, and rent collections stayed high, even at schools whose student populace went mostly remote.

Many of the funders who balked at student housing earlier in the pandemic were foreign and institutional investors. But now, JLL is reporting that such investors are eagerly coming back to the fray, pointing to transactions such as Blackstone Real Estate Income Trust’s buy of an eight-property student housing portfolio in August, a transaction totaling $784 million.

And with investors focused on yield, new players are getting enticed into the student housing game.

“Some of these new entrants are conventional multi-housing investors and some are experienced commercial real estate investors who have historically focused on other product types but, because of how resilient student housing has proven to be historically, see this as an opportunity to invest,” said Stewart Hayes, senior director at JLL Capital Markets.

“In some of our recent assignments,” he added, “new entrants have totaled up to half of bidders.”

Investors have also shown an keenness to finance student housing development. Fountain Residential Partners recently obtained $23.3 million in joint venture equity to build a lakefront student housing community near Clemson University, while Greystar and Star America arranged a combined $146.1 million in construction funding for a pair of projects near the University of Oregon and the University of Washington.

“The financing markets are really improving dramatically for student housing, with the debt liquidity in the sector extremely healthy and improving daily,” said Doug Opalka, managing director at JLL Capital Markets. “We’ve closed a number of transactions and have many in the works with the agencies, life companies, debt funds, and banks. They’re all at leverage and pricing that is really driving strong returns for the buyers of these assets.”


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