The Evolution of Student Housing as an Investment: Q&A with David Brickman

Once the purview of mostly mom-and-pop owners, student housing has been treated as an institutionalized asset class since the late 2000s. And, like other real estate sectors, this niche multifamily sector continues to evolve.

ApartmentBuildings.com recently asked Adam America Real Estate CEO David Brickman for his analyses and insights about student housing investments.

Q. What seems to be the biggest misconception about student housing?

A. That the sector moves as one national market. The “demographic cliff” headlines suggest a broad-based slowdown, but enrollment trends are actually diverging significantly. Strong flagships and high-demand publics are gaining share while smaller and less selective schools are losing ground. Treating student housing as a monolithic asset class instead of underwriting each university individually is the biggest mistake I see.

Q. What have been the largest sector shifts over the past decade?

A. Large institutional owners and developers have increasingly chased the same handful of Power Four schools, drawn by their enrollment growth, brand strength and liquidity. That’s brought more capital into those markets. In some cases, it’s also brought more supply than the underlying enrollment growth can absorb, even at strong schools.

Meanwhile, mid-tier and smaller universities have seen comparatively little institutional interest, despite their own fundamentals. That capital concentration, more than any single demand trend, is what’s reshaped the sector over the past ten years.

Q. What are some of the outdated assumptions about the investment class?

A. The old thesis that any bed near campus will lease is dead. Oversupply in several markets has proven that proximity alone doesn’t guarantee absorption. Also outdated is the assumption that enrollment growth is a given. Underwriting now has to start from a school’s actual enrollment trajectory and financial health, not historical averages.

Also, investors used to underwrite the market. Now they underwrite the institution. Enrollment growth, admissions selectivity, and financial durability drive the decision as much as the real estate fundamentals themselves.

Q. What else do investors look for when considering a student housing project?

A. University financial strength, admissions momentum such as applications, yield, and out-of-state mix, and the on-campus housing supply and demand imbalance. Research funding and endowment size matter, but more indirectly. Enrollment trajectory and university financial health remain the primary drivers of where we get active.

Also, local housing supply, off-campus rent comparables, walkability, proximity to campus, and construction and insurance cost trends all factor into whether a deal pencils.

Q. How do AI and smart building tech play into this?

A. AI helps compress the enrollment analysis, demand forecasting, and dynamic pricing that used to take much more manual work. Meanwhile, smart building tech is driving down operating costs through better energy management and predictive maintenance.

But it cuts both ways. Students are armed with far more information than they’ve ever had, and they’re using it to negotiate harder with their landlords.

In some cases, we’re seeing the effects of this play out in leasing timelines, with buildings leasing later, closer to the start of the academic year, than they have in the past. So, the same advantage that helps owners underwrite and operate more efficiently is also giving renters more leverage at the negotiating table.

Q. What are some higher-education trends that will impact student housing, going forward?

A. Continued enrollment concentration at large, well-resourced flagships, growing reliance on international students at some institutions, and financial pressure on smaller private and regional schools, some of which will consolidate or close. All of this reinforces the winners-and-losers dynamic.

We’re closely monitoring international enrollment at universities and visa issuance trends. International students have become a meaningful demand driver at many schools, and any shift in visa policy or issuance volume can have an outsized impact on leasing and pricing at the properties most reliant on that demand.

This article previously appeared on ApartmentBuildings.com.

Photo: Cornell University Student Housing/Shutterstock