2016 records most transaction volume in student housing history
In 2016, more than $10 billion of capital flowed into the U.S. student housing space with $9.33 billion directed toward the acquisition of investment-grade student housing assets priced at $10 million or more, according to ARA Newmark Student Housing Group’s 2016 Market Overview report. The 2016 transaction volume for student housing was the highest ever.
The figure represents an increase of nearly 64 percent over 2015’s then-record of $5.69 billion and 136 percent over the previous record of $3.5 billion set in 2012.
And enrollment in degree-granting institutions was projected to grow to 19.8 million in 2015, up from 17.3 million in 2014, according to the National Center for Education Statistics. A report finds millennials — those born between 1981 and 1997 — are pursuing college and post-graduate degrees in record numbers, creating a huge demand for student housing, according to TH Real Estate’s latest research report, THINK U.S.: Student Housing. These students are seeking custom-designed complexes, with private bedrooms and bathrooms, as well as high-end amenities such as swimming pools, fitness centers and state-of-the-art Internet connectivity.
The universities with the most supply during the fall 2016 were University of Arkansas with 2,072 beds, followed by Texas A&M University (1,850 beds) and University of Maryland (1,493 beds).
There are currently more than 30,000 beds scheduled for delivery in 2018, which is in-line with the 2017 development pipeline at the same time period last year. And less than a third of the 92 universities that received new deliveries in 2016 are expecting additional beds in 2017.
Furthermore, of the 74 universities expecting new supply in 2017, only 10 are anticipating more than 1,000 beds. Student enrollment is the demand driver for purpose-built student housing and many universities are struggling to keep pace with the demand.
The universities expected to have the most supply during the fall 2017 are Texas Tech University with (3,734 beds), followed by Texas A&M University (2,336 beds) and Baylor University (1,681 beds).
The U.S. student housing market had its seventh consecutive year of annual rent growth in 2016, and inventory has increased by 56.3 percent over the past 10 years, according to a Kroll Bond Rating Agency report summarizing current trends in the industry.
According to American Campus Communities, a REIT that owns the largest student housing portfolio in the United States with 94,000 beds, the current trend is for new developments to be built within walking distance to campus; in contrast, the majority of communities built prior to 2010 are not walkable.
Construction completions over the past 10 years peaked in 2008 with projects that broke ground prior to the economic downturn. After two years of declining supply additions, a four-year expansion commenced in response to record increases in university enrollment in 2008 and 2009. As of December 2016, approximately 15,400 student housing units were under construction nationwide, representing 4.3 percent of the existing inventory. If all of these units are completed in 2017, the supply growth this year will be in line with 2016.
Thus far this year, there have been several high-profile U.S. student housing transactions:
- A consortium of the C$298 billion ($223 billion) Canada Pension Plan Investment Board, Singapore’s GIC sovereign wealth fund and The Scion Group has acquired three portfolios of U.S. student housing for approximately $1.6 billion through their student housing joint venture entity, Scion Student Communities.
- Singapore-based Mapletree Investments has acquired a portfolio of U.S. student housing assets from Kayne Anderson Real Estate Advisors.
- QuadReal Property Group, CA Student Living and GI Partners have formed a joint venture to acquire, develop and manage student housing at U.S. universities.