Student housing has seen a dramatic modernization and technological transformation in recent years. Student standards and needs have shifted, and it is up to multifamily investors to adapt to these evolving needs. Additionally, the continuously expanding middle class is boosting the number of students pursuing higher education, thus increasing the demand for more student housing options. These factors have made student housing a desirable asset for multifamily investors.
How Student Housing Has Evolved
Decades ago, student housing options were minimal; students had to choose between an apartment in the city or a dorm on campus. The options on campus were usually limited, and affordable off-campus options were not always in the best neighborhoods. Students were used to settling and trying to make the best out of a not-ideal situation. However, times have changed, and 18-24 year-olds are expecting more out of their housing. Providing quality options for prospective students is now a critical component in attracting and retaining new students at higher education institutions. Off-campus housing offers modern amenities, fitness centers, pools, and outdoor lounging areas to compete with the influx of competition.
There is more to a living space than what has been offered in the past. This generation is demanding more for their money.
To maximize profits, most student housing developers provide three- and four-bedroom units. Several colleges have found that offering this number of units has proven to be more competitive within the student housing sector. Student housing typically provides accommodations at costs that are competitive with other housing options, like dorms and traditional apartments. Compared to the alternatives, modern student housing provides higher levels of security, privacy, better amenities, faster internet, and accessibility to the university.
The population between the ages of 18 and 24 is expected to continue growing until 2050. The broader economy has led individuals who can afford higher education to seek more degrees to delay joining the labor market while also improving their marketability.
As mixed-use developments continue to pop up around the country, residents can anticipate placemaking playing a major role in attracting people to live in certain communities. Placemaking offers the highest possible use of a property. Overall, the goal of placemaking is to not only attract residents but make them stick around.
A rise in international student enrollment also boosted housing demand in the U.S. The U.S. is the top destination for international students, and this expected rise will place even more pressure on multifamily developments.
Right Pick for Multifamily Investors
Investors looking to invest in the multifamily subsector should direct their attention to student housing. The tenant base for student housing is exceedingly stable, especially if located in a growing market. Tenants frequently pre-lease before the start of the school year, resulting in a highly predictable cash flow. Furthermore, leases are nearly always given on a 12-month basis, eliminating the need to be concerned about summer vacancies. Delinquencies are also less of an issue because parents are the lease’s guarantors.
Additionally, student housing is less likely to be impacted by negative economic times, according to the National Multifamily Housing Council. These findings did not see a significant decrease in student enrollment during recessionary times, alluding to the belief that student housing is a recession-proof asset.
This asset type is an excellent way for investors to diversify their holdings.
Demand for student accommodation is expected to rise as a result of evolving demographics, macroeconomic trends, and projected increases in the number of university students. The sector’s future performance, like that of traditional apartments, will be heavily influenced by the supply and demand balance in each submarket.