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Large investors target student housing real estate opportunities

The student housing industry has proved to be one of the most resilient asset classes during the pandemic and continues to grow during the current turbulent economic period. In Texas and other states, student housing has largely resisted the impacts of inflation while seeing rents grow.

That relative stability has encouraged large institutional capital investors, such as sovereign wealth and pension funds, to increase their investments in commercial real estate. To that end, many large investors partner with or acquire large development firms and property management companies.

The trend began early in the second quarter

The rise of institutional capital in the student housing real estate market is squeezing smaller investors. Prominent developers are looking for these partnerships as investors with deeper pockets can help them find more favorable loan terms as interest rates rise. Two transactions in April set the tone for many others:

  • Blackstone bought American Campus Communities for $13 billion to build student housing
  • Brookfield announced a $1 billion partnership with Scion Group to purchase student housing assets

As a result of these high-profile deals, many smaller investors have been priced out of the most attractive markets for student housing.

Student enrollment reflects recovery from the pandemic

Not all college campuses are springing back to life following the past 2 ½ years of the pandemic. Enrollments are down in many universities and other higher education institutions. But record fall enrollments have been reported for others, including Texas Southern University in Houston.

Those with declining enrollments and without significant endowments could struggle to survive as they have a much smaller margin for error. The impact could be devastating to cities and especially student housing developments.

For that reason, investors are considering student housing projects that could revert to apartments for the general population. Another consideration is looking for opportunities for public-private partnerships on non-housing projects, such as parking and concessions.