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Has U.S. Student Housing Market Hit its Peak?
Millennials have driven the upswing in student housing investment in the U.S. over the last decade. But as the 18 to 24-year-old cohort moves into later life stages, Real Capital Analytics’ researcher Jim Costello questions if that will sustain investor interest in the property category.
In previous cycles, changes in demographics led to universities being overinvested in staff and facilities when smaller cohorts followed larger ones. Costello notes a shift in ownership has occurred in this student housing cycle too, from universities to CRE investors. “Universities owned the student housing back then; today, its investors in student housing who may face a similar challenge with too many beds and not enough students,” he said.
RCA reports investment in student housing surged over the last 13 years. From only $2.4 billion per year from 2004 to 2008, investment shot up in line with the cohort growth. Purchases of existing student housing came in at $9.8 billion in 2016 while construction starts hit $5.1 billion that year. Both values were peak levels for investment activity, notes Costello.
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