No Signs of Slowdown for the Student Housing Boom

The last few years have proven resilient for student housing, with the sector remaining strong. We spoke with Jack Palms, VP of Acquisitions at RREAF Holdings, on why student housing stands out and what the future holds for the sector.  

Q: With a notable surge in investor interest, what factors do you believe are driving this enthusiasm for the student housing market right now?

A: Investors have always had a strong interest in multifamily properties, which is, in essence, what student housing imitates. However, student housing offers owners and investors an additional line of security. Year-over-year student housing has continued to have histrical performance both in terms of rent growth and occupancy.

Q: How does the investment landscape in student housing differ from other real estate sectors, and what advantages does it offer to investors? What specific attributes or metrics are investors prioritizing when evaluating opportunities in student housing?

A: Student housing allows owners/developers to “lock in” leases for an entire year and not have the physical occupancy volatility of traditional multifamily. Student housing typically has an additional layer of credit through parental guarantees.

Student housing investors will investigate metrics such as school infrastructure, enrollment, enrollment projections, new school initiatives, proximity to campus, campus development activity, and school conferences. At RREAF, we are focused on acquiring student housing assets located near Power 5 Schools and Tier 1 Research Institutions.

Q: How does risk assessment differ in student housing compared to more traditional real estate investments?

A: Simply put, your tenants are students in college, which comes with different levels of credit, insurance, and asset damage risk. This can come in the impacts of occupancy or rent growth, and these risks are always weighed into the “risk-adjusted returns” for the asset type, whether that is a core, value-add, or development deal.

What are the key drivers that make student housing a resilient investment option, especially in today’s challenging economic climate?

In previous challenging economic climates, we saw an increase in higher education as this tends to correlate with a tougher labor market. This makes student housing somewhat predictable in that preleasing and lease terms provide a predictable revenue stream for owners and investors and reduce the risk of vacancies.

What factors could influence growth over the next 5-10 years? Looking ahead, how do you see the future of student housing continuing to evolve? 

With new technology replacing several jobs, there might be a shift in people wanting/needing to attend school to enter the workforce. Students will continue to seek out the large tier 1 institutions, prioritize assets near the campus, and provide notable amenities.

For an extended version of this interview, click here to visit ApartmentBuildings.com.